FIL 240 Lecture21Outline of Last Lecture I. Investmentsa. IPOb. Regulation D exemptionsc. Regulation A exemptionsII. 1933 Registration Statementa. FormsIII. Registration statementa. Prospectusb. Underwritersc. Sindicitd. Best Effortse. Self-underwritingIV. Common stocka. RulesOutline of Current Lecture I. Cash Dividendsa. Payout Ratiob. Dividend Yieldc. Declaration dated. Date of recorde. Price Ex-dividendII. Theoriesa. Residualb. Clientelec. Signalingd. Bird-in-handIII. Types of Dividendsa. Stock Dividendb. Stock SplitCurrent LectureDividendsI. Cash DividendsThese 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. Payout Ratio = Dividends/Net incomeb. Dividend Yield = Dividends/Pricec. Declaration date – date that the board of directors declares dividendsd. Date of record – when the dividends are actually given out, as long as stock is bought before this date, you get the dividende. Price Ex-dividend – time directly following the date of record when the stock price fallsII. Theoriesa. 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. III. Types of Dividendsa. Stock Dividend – Instead of cash, the firm gives stock to the investors as a dividendb. 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
View Full Document
Unlocking...