Dividend Policy. Dr. Bagus Nurcahyo Program Studi Manajemen Pemasaran, Direktorat Program Diploma Tiga Universitas Gunadarma. Dividends or Capital Gains?. The ultimate goal of financial managers should be the maximization of shareholder wealth.
Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.
Dr. Bagus Nurcahyo
Program Studi Manajemen Pemasaran, Direktorat Program Diploma Tiga Universitas Gunadarma
Jumping on the Dividend Bandwagon:
The tax cut makes equity attractive in more ways than one
The dividendtax cut signed into law by President Bush in late May already is leading some publicly traded companies to boost the dividends they pay shareholders, hoping it will help the share price. And even those that can't afford to offer much in the way of dividends may find a way to benefit from other parts of the tax law changes. Last week Goldman Sachs and Bank of America joined the companies that have jumped on the dividend bandwagon. Goldman last week more than doubled its dividend to $0.25 per share, and BofA raised its quarterly dividend 25% to $0.80, from $0.64. One of the first companies to anticipate the dividend tax cut was Microsoft Corp., which announced its first-ever annual dividend, of $0.16, in January. . . .
Still, it's equity dividends that have suddenly become more attractive to investors. That has many publicly traded companies suddenly revisiting how they use their free cash. Many now are favoring dividends over their previous stock-boosting efforts, such as tax-advantaged share buybacks.
(Britt Erica Tunick, from Investment Dealers Digest, June 30, 2003)
1. Firms have longer term target dividend payout ratios.
2. Managers focus more on dividend changes than on absolute levels.
3. Dividend changes follow shifts in long-run, sustainable levels of earnings rather than short-run changes in earnings.
4. Managers are reluctant to make dividend changes that might have to be reversed.
5. Firms repurchase stock when they have accumulated a large amount of unwanted cash or wish to change their capital structure by replacing equity with debt.