1. Daniel Adam Blanco PAYOUT POLICIES

2. How to pay out cash to shareholders? Dividends Buy back shares

3. How to pay dividends and repurchase stocks? Set by? Board of Directors To whom? Depends on Record Date Stocks sold w/ dividends? Until 2 business day Before Record Date

4. How to pay dividends and repurchase stocks? Cash No Cash Regular Special DRIPs Stock Dividends

5. How to pay dividends and repurchase stocks? How do firms repurchase stock? Open market Tender plans Dutch auction Direct negotiation

6. How do companies decide on the payout? Firm´s dividend policies

7. How do companies decide on the payout? Then, why? Acc. Unwanted Cash Change Capital Structure ▲ debt ▼ equity

8. How do companies decide on the payout? Use of Dividends = Use of Repurchases? Dividends are not an appropiate way to pay out transitory earnings

9. The information in dividends and stock purchases Is information reliable? Assets and earnings Dividends Meaningless Reliable in the l/r

10. The information in dividends and stock purchases Dividend changes predict future? No increase without enough cash Investors like increase in dividends Unexpected change can cause stock prices to bounce

11. The information in dividends and stock purchases What information do repurchases give? Signal of a manager´s confidence in the future

12. The payout controversy

13. The payout controversy Miller and Modigliani Rightists Radical Left

14. The payout controversy Rightists Favor large payouts Financial institutions Clientele of investors

15. The payout controversy Rightists Regular dividends Relieve transaction costs Behavioral psychology Lack of profitable investment

16. The payout controversy Surplus of money = dividends Situation Fixed investment. No borrowing Transfer Value

17. The payout controversy Transfer of Value

18. The payout controversy Transfer of Value

19. The payout controversy Therefore Value = assets and CF ▲ payout = ▲ cash must be recovered by ▲ stocks Payout constant ▲ dividend= ▼ cash shareholders receive for repurchase

20. The payout controversy Taxes and Radical Left High taxes on dividends Available cash= retained or used for repurchasing

21. The payout controversy Any evidence?

22. The payout controversy Any evidence? Taxes are important But its difficult to measure

23. The payout controversy Middle-of-the-roaders Company´s value is not affected by dividend policy

24. The payout controversy Middle-of-the-roaders Company´s value is not affected by dividend policy Supply of dividends is free to adjust to demand

25. Thanks!