金融学基础语银行实务.ppt

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1、,Where are We?,Chapter 4 9,Where are We?,Chapter 4 9,Chapter 7 Dividend and Dividend Policies,Outline,Dividends,A dividend is the cash,stock,or any type of property a corporation distributes to its shareholders.dividends are not a legal obligation of the corporationit is the boards choice.When the b

2、oard of directors declares a dividend distribution,it species the amount of the distribution,the date on which the distribution is paid:,Dividends,There are four key dates in a distribution a dividend distribution1.The declaration date,which is the date the board declares the distribution.2.The ex-d

3、ividend date,also called ex-date,is two days prior to the date of record.Any investor who owns the stock the day before the ex-date receives the forthcoming dividend.Any investor who buys the stock on the ex-date does not receive the dividend.3.The date of record,which is the date that determines wh

4、o receives the dividend.An investor must be listed in the companys record book on the date of recordto ensure the right of a dividend payout.4.The payment date,which is the day the distribution is made.This date is generally a week or more after the date of record so that the company has sufficient

5、time to ensure that it accurately pays all those who are entitled.,Dividends,There are four key dates in a distribution a dividend distributionWhy All These Dates?Ex-dividend dates are used to make sure dividend checks go to the right people.In todays market,settlement of stocks is a T+3 process,whi

6、ch means that when you buy a stock,it takes three days from the transaction date(T)for the change to be entered into the companys record books.if you are not in the companys record books on the date of record,you wont receive the dividend payment.,Dividends,There are four key dates in a distribution

7、 a dividend distributionQuestion1:when do you think is the latest date an investor needs to buy a companys stock if he wants his purchase to be shown in the companys book?Question2:When is the earliest date an invest needs to hold a companys stock before he sells,in order to still receive the compan

8、ys dividend?,Last day to buy,Earliest day to sell,Dividends,Cash dividends:Most dividends are in the form of cash.Cash dividends are payments made directly to shareholders in proportion to the shares they own.,Dividends,Cash dividends:We usually describe the cash dividends that a company pays in ter

9、ms of dividend per share,which we calculate as:Another way of describing cash dividends is in terms of the percentage of earnings paid out in dividends,which we refer to as the dividend payout ratio.If we take this last equation and divide both the numerator and the denominator by the number of comm

10、on shares outstanding,we can rewrite the dividend payout ratio as:The dividend payout ratio is the complement of the retention ratio,also referred to as the plowback ratio.The retention the proportion of earnings retained and reinvested back into the company.,Dividends,Cash dividends:Exercise:For sc

11、al year 2008,Wal-Mart Stores reported the following nancial results:Earnings available to common shares$13.400 billion Dividends paid$3.746 billion Number of common shares outstanding 3.81 billion Question：What are Wal-Mart Stores earnings per share,dividend per share,dividend payout ratio and reten

12、tion ratio?,Answer:Dividend per share=$3.746 billion/3.81 billion=$0.9832 per share Dividend payout ratio=$3.746 billion/$13.400 billion=27.955%Earnings per share=$13.4 billion/3.81 billion=$3.517 per shareRetention ratio=1-27.995%=72%,Outline,Dividends,Stock distribution:When dividends are not in c

13、ash,they are usually additional shares of stock.Additional shares of stock can be distributed to shareholders in two ways:paying a stock dividend and splitting the stock.,Dividends,Stock dividend:A stock dividend is the distribution of additional shares of stock to shareholders.Stock dividends are g

14、enerally stated as a percentage of existing share holdings.If a corporation pays a stock dividend,it is not transferring anything of value to the shareholders.The assets of the corporation remain the same and each shareholders proportionate share of ownership remains the same.All the corporation is

15、doing is cutting its equity“pie”into more slices and at the same time cutting each shareholders portion of that equity into more slices.,Dividends,Stock split:is something like a stock dividend.A stock split splits the number of existing shares into more shares.For example,in a 2:1 splitreferred to

16、as“two for one”each shareholder gets two shares for every one owned.If an investor owns 1,000 shares and the stock is split 2:1,the investor then owns 2,000 shares after the split.Question:Has the portion of the investors ownership in the company changed?,No,the investor now simply owns twice as man

17、y sharesand so does every other shareholder.If the investor owned 1%of the corporations stock before the split,the investor still owns 1%after the split.,Dividends,Reverse stock split:is similar to a stock split,but backwards Example:a 1:2 reverse stock split reduces the number of shares of stock su

18、ch that a shareholder receives half the number of shares held before the reverse stock split.A stock split in which more shares are distributed to shareholders is sometimes referred to as a forward stock split.there is no actual distribution made,but simply a division of the equity piein this case,i

19、nto fewer pieces.,Dividends,Difference between a stock dividend and a stock split.stock splits and stock dividends are essentially the same.there is only a minor difference in accounting:A stock dividend requires a shift within the stockholders equity accounts,from retained earnings to paid-in capit

20、al for the amount of the distribution A stock split requires only a memorandum entry.,Dividends,Reasons for stock dividends:1.to provide information to the market:A company may want to communicate good news to the shareholders without paying cash.For example,if the corporation has an attractive inve

21、stment opportunity and needs funds for it,paying a cash dividend doesnt make any senseso the corporation pays a stock dividend instead.But is this an effective way of communicating good news to the shareholders?It costs very little to pay a stock dividendjust minor expenses for recordkeeping,printin

22、g,and distribution.But if it costs very little,do investors really trust it as a signal?,Dividends,Reasons for stock dividends:2.to reduce the price of the stock:If the price of a stock is high relative to most other stocks,there may be higher costs related to investors transactions of the stock,as

23、in a higher brokers commission.By paying a stock dividendwhich slices the equity pie into more piecesthe price of the stock should decline.There is no change in value of the portion of the equity any investor owns.Nothing economic has gone on herethe company has the same assets,the same liabilities,

24、and the same equity.Example:Suppose an investor owns 1,000 shares,each worth$50 per share.If the corporation pays the investor a 5%stock dividend.How many shares does the investor own after the dividend?What do you think the price per share should be now?,Shares owned after dividend=1050Price per sh

25、are after dividend=(1000*$50)/1050=$47.6,Dividends,Reasons for stock split:Like a stock dividend,the split reduces the trading price of shares.Example:If an investor owns 1,000 shares of the stock trading for$50 per share prior to a 2:1 split,the shares should trade for$25 per share after the split.

26、,Dividends,Reasons for reverse stock split:Companies tend to reverse stock split when the stocks price is extremely low,so low that they are at risk of being delisted from an exchange.A low stock price is a function of how many shares are outstanding,but mostly a function of poor performance which h

27、as led to a low share price.,Dividends,Effect of stock dividends and stock splits The share price of companies announcing stock distributions and forward stock splits generally increase by 1%to 2%at the time of the announcement.When the stock dividend is distributed or the split is effected(on the e

28、x-date),the shares price typically declines according to the amount of the distribution.Example 1:Suppose a company announces a 2:1 split.Its share price may increase by 1%to 2%when this is announced,but when the shares are split,the share price will go down to approximately half of its presplit val

29、ue.,Dividends,Effect of stock dividends and stock splits Example 2:What do you see in this example?,The price does not adjust solely by the split because of the inuence of other market and economic events,but the adjustment is very close the stock price is almost 1/2 that of the presplit for the 2:1

30、 split,and the stock price is slightly more than 4 times that presplit for the 1:4 split.,Dividends,Effect of stock dividends and stock splits Exercise:,2513.332532,2 million2.25 million2 million1.25 million,Outline,Dividend Policies,A dividend policy is a corporations decision about the payment of

31、cash dividends to shareholders.Ways of describing a corporations dividend policy:No dividends.Constant growth in dividends per share.Constant payout ratio.Low regular dividends with periodic extra dividends.,Dividend Policies,No dividends.The corporations that typically do not pay dividends are thos

32、e that are generally viewed as younger,faster growing companies.For example,Microsoft Corporation was founded in 1975 and went public in 1986,but it did not pay a cash dividend until January 2003.,Dividend Policies,Constant growth in dividends per share and constant payout ratio.A common pattern of

33、cash dividends tends to be the constant growth of dividends per share.Another pattern is the constant payout ratio.Many other companies in the food processing industry,such as Kellogg and Tootsie Roll Industries,pay dividends that are a relatively constant percentage of earnings.Some companies displ

34、ay both a constant dividend payout ratio and a constant growth in dividends.This type of dividend pattern is characteristic of large,mature companies that have predictable earnings growththe dividends growth tends to mimic the earnings growth,resulting in a constant payout.,Dividend Policies,Constan

35、t growth in dividends per share and constant payout ratio.U.S.corporations that pay dividends tend to pay either constant or increasing dividends per share.Dividends tend to be lower in industries that have many protable opportunities to invest their earnings.But as a company matures and nds fewer a

36、nd fewer protable investment opportunities,it generally pays out a greater portion of its earnings in dividends.Many corporations are reluctant to cut dividends because the corporations share price usually falls when a dividend reduction is announced.,Dividend Policies,Constant growth in dividends p

37、er share and constant payout ratio.U.S.corporations that pay dividends tend to pay either constant or increasing dividends per share.Dividends tend to be lower in industries that have many protable opportunities to invest their earnings.But as a company matures and nds fewer and fewer protable inves

38、tment opportunities,it generally pays out a greater portion of its earnings in dividends.Many corporations are reluctant to cut dividends because the corporations share price usually falls when a dividend reduction is announced.For example,the U.S.auto manufacturers cut dividends during the recessio

39、n in the early 1990s.As earnings per share declined the automakers did not cut dividends until earnings per share were negativeand in the case of General Motors,not until it had experienced two consecutive loss years.But as earnings recovered in the mid-1990s,dividends were increased.4,Dividend Poli

40、cies,Low regular dividends with periodic extra dividends Because investors tend to penalize companies that cut dividends,corporations tend to only raise their regular quarterly dividend when they are sure they can keep it up in the future.By giving a special or extra dividend,the corporation is able

41、 to provide more cash to the shareholders without committing itself to paying an increased dividend each period into the future.,Dividend Policies,To pay or not to pay dividends-rule of thumb If a company increases its dividends or pays a dividend for the rst time,this is viewed as good newsits shar

42、e price increases.If a company decreases its dividend or omits it completely,this is viewed as bad newsits share price declines.,Outline,Stock Repurchase,Corporations have repurchased their common stock from their shareholders.A corporation repurchasing its own shares is effectively paying a cash di

43、vidend,with one important difference:taxes.Cash dividends are ordinary taxable income to the shareholder.A companys repurchase of shares results in a capital gain or loss for the shareholder,depending on the price paid when they were originally purchased.If the shares are repurchased at a higher pri

44、ce,the difference may be taxed as capital gains,which may be taxed at rates lower than ordinary income.,Stock Repurchase,Methods of Repurchasing Stocka tender offeropen market purchasesa targeted block repurchase.,Stock Repurchase,（1）A tender offer A tender offer is an offer made to all shareholders

45、,with a specied deadline and a specied number of shares the corporation is willing to buy back.The tender offer may be a xed price offer,where the corporation species the price it is willing to pay and solicits purchases of shares of stock at that price.A tender offer may also be conducted as a Dutc

46、h auction in which the corporation species a minimum and a maximum price,soliciting bids from shareholders for any price within this range at which they are willing to sell their shares.After the corporation receives these bids,they pay all tendering shareholders the maximum price sufcient to buy ba

47、ck the number of shares they want.A Dutch auction reduces the chance that the company pays a price higher than needed to acquire the shares.Dutch auctions are gaining in popularity relative to xed-price offers.,Stock Repurchase,（2）Open market repurchase A corporation may also buy back shares directl

48、y in the open market.This involves buying the shares through a broker.A corporation that wants to buy shares may have to spread its purchases over time so as not to drive the shares price up temporarily by buying large numbers of shares.,Stock Repurchase,（3）a targeted block repurchase is to buy it f

49、rom a specic shareholder.This involves direct negotiation between the corporation and the shareholder.This method is referred to as a targeted block repurchase,since there is a specic shareholder(the“target”)and there are a large number of shares(a“block”)to be purchased at one time.,Stock Repurchas

50、e,Reasons to Repurchase Stock1.a repurchase is a way to distribute cash to shareholders at a lower cost to both the company and the shareholders than dividends.If capital gains are taxed at rates lower than ordinary income,which until recently has been the case with U.S.tax law,repurchasing is a low