Payout policy

Question 1

What is a special cash dividend?

Answer 1

One off supplement to the regular dividend

Question 2

Whats an automatic dividend reinvestment plan?

Answer 2

New shares issued at a discount from market price

Question 3

What is a stock dividend?

Answer 3

Company issues new shares to stock holders at a % of their owned shares, instead of cash dividend

Question 4

One day before the record date, the price falls by the amount:

Answer 4

Of the dividend

Question 5

Instead of paying dividends, firms can use the cash to:

Answer 5

Repurchase stock

Question 6

what is a tender offer:

Answer 6

Firms offer to buy back part of the stock at a higher fixed price from shareholder

Question 7

What are two ways to repurchase stocks

Answer 7

• Dutch auction

- Private negotiation

Question 8

The announcement of a dividend increase is __ __ for investors

Answer 8

Good news

Question 9

Announcement of a dividend increase signals what to investors?

Answer 9

• Manager confidence in earnings

- Safer earnings

Question 10

Old shareholders can cash in by:

Answer 10

• Persuading management to pay a higher dividend

- Sell some shares

Question 11

Normally, dividends are taxed more heavily than:

Answer 11

Capital gains