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imported>Doug Williamson |
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| In financial theory, dividend payments and policies should be irrelevant when financial markets are efficient.
| | The proportion of the total earnings attributable to ordinary shareholders paid out by way of ordinary dividends. |
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| This is because amounts retained - or distributed - by the company would in theory earn the same future rate of return for the investors.
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| Moreover, investors who require cash could sell part of their holdings.
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| While investors who don't require cash could use any dividend distributions to buy more shares in the company.
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| But in practice decisions about dividend levels are important because of:
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| #Their informational content. This informational content is known as ''[[signalling]]''.
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| #The potential to move closer to, or away from, a firm's optimal capital structure.
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| #Possibly, [[clientele]] effects, including taxes on investors.
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| | Also known as the Payout ratio. |
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| == See also == | | == See also == |
| * [[Capital structure]] | | * [[Dividends]] |
| * [[Clientele]] | | * [[Earnings]] |
| * [[Dividend]] | | * [[Retention ratio]] |
| * [[Lintner]]
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| * [[Residual theory]]
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| * [[Rights issue]]
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| *[[Signalling]]
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| * [[Theoretical ex-rights price]]
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| [[Category:The_business_context]]
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| [[Category:Corporate_finance]]
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| [[Category:Investment]]
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| [[Category:Financial_products_and_markets]]
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Revision as of 14:19, 23 October 2012
The proportion of the total earnings attributable to ordinary shareholders paid out by way of ordinary dividends.
Also known as the Payout ratio.
See also