Briefly explain how dividends can be signals
"Dividends represent cash in hand. Obviously higher dividends are always better." Is this statement necessarily true?
What factors should be taken into account in determining a firm's payout policy?
If a firm earns a rate of return on equity that is equal to its cost of equity, should it retain earnings or pay them out? Why or why not?
Firms with low leverage often have low payout ratios as well. Is this a coincidence? Explain.
What is better -- paying dividends or buying back shares?
What correlation would you expect to find between firms' payout ratios and their betas? Explain.
Would you expect established firms to have high or low payout ratios? Explain.
Just as issuing equity dilutes earnings, buying back stock is good because it increases earnings per share. Comment. (Look at Issuing equity dilutes earnings.)
Extra Cash Dividend
Dividend Payout ratio
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