Types of distributions. Cash dividends Repurchases Stock dividends Stock splits. Cash Dividends. Regular cash dividend – cash payments made directly to stockholders, usually each quarter Extra cash dividend – indication that the “extra” amount may not be repeated in the future
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The irrelevance proposition stems from Modigliani and Miller. They assume:
Accumulated cash, when left to the discretion of the managers, can be wasted on negative NPV projects
Committing to pay dividends reduces the cash available for use at the discretion of managers