FIL 240 Lecture 21 Outline of Last Lecture I Investments a IPO b Regulation D exemptions c Regulation A exemptions II 1933 Registration Statement a Forms III Registration statement a Prospectus b Underwriters c Sindicit d Best Efforts e Self underwriting IV Common stock a Rules Outline of Current Lecture I Cash Dividends a Payout Ratio b Dividend Yield c Declaration date d Date of record e Price Ex dividend II Theories a Residual b Clientele c Signaling d Bird in hand III Types of Dividends a Stock Dividend b Stock Split Current Lecture Dividends I Cash Dividends These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute a b c d II III Payout Ratio Dividends Net income Dividend Yield Dividends Price Declaration date date that the board of directors declares dividends Date of record when the dividends are actually given out as long as stock is bought before this date you get the dividend e Price Ex dividend time directly following the date of record when the stock price falls Theories a Residual Theory Firms pay dividends out of earnings that remain after it meets its financing needs Funds for which the firm has no immediate use i Once a company declares dividends shareholders come to expect them all the time b Clientele Theory some companies want specific clients to buy their stock either they only want Wall Street types or ordinary people Ordinary people want dividends while Wall Street types don t want dividends they want the company to reinvest their extra money into the company c Signaling Theory in corporate affairs the non verbal methods a company uses to convey communicate or otherwise share its financial condition ex burning a 100 bill or dividends i Signal Control Management making sure the signals you send are the ones you want to send Ex Pres Flannigan Mozilla CEO d Bird in Hand Theory Idea that management in an older tradition will say that the investors if given the choice would choose dividends over the stock price going up Types of Dividends a Stock Dividend Instead of cash the firm gives stock to the investors as a dividend b Stock Split amount of stock increases above 25 might be done to lower the price of stock so that ordinary people can afford to buy their stock
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