Ce diaporama a bien été signalé.
Le téléchargement de votre SlideShare est en cours. ×

Dividend Policy Report

Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Chargement dans…3
×

Consultez-les par la suite

1 sur 23 Publicité
Publicité

Plus De Contenu Connexe

Diaporamas pour vous (20)

Similaire à Dividend Policy Report (20)

Publicité

Plus récents (20)

Dividend Policy Report

  1. 1. Dividend policy Financial Management 2: By: Jonel Lunario Christine Manongsong Professor: Mr. Nelson Abesamis, CPA
  2. 2. OBJECTIVES: 1. Describe the effect of a dividend policy 2. Recognize the difference between the dividend dates 3. Discuss the types of dividend policies (advantages/disadvantages) 4. Explain the financial and operating factors that affect the amount of dividends paid 5. Differentiate share capital dividends and share splits
  3. 3. DIVIDENDS a distribution from the net profits of a company to its shareholders
  4. 4. DIVIDEND POLICY The policy a company uses to decide how much it will pay out to shareholders in dividends. EFFECTS: 1. Influences the investor’s attitude 2. Impacts financing program and capital budgeting 3. Affects cash flow 4. Lowers shareholder’s equity
  5. 5. R - record DIVIDEND DATES D - declaration E - ex-dividend P - payment
  6. 6. • Cash dividends • Property dividends • Liability dividends in the form of bond or scrip • Stock dividends or bonus issue Dividends out of earnings
  7. 7. Illustration (cash dividend): The board of directors of an entity, at their meeting on November 20 2012 declared a dividend of P20/share, payable April 30 2013, to shareholders of record on December 31, 2012. The entity has 20,000 shares issued and outstanding with par value of 100.
  8. 8. Illustration (property dividend): On November 1, 2012, an entity declared a property dividend of equipment payable on March 1, 2013. The carrying amount of the equipment is P3M and the fair value is P2.5M on November 1, 2012. However, the fair value less cost to distribute the equipment is P2.2M on December 31, 2012, P2M on March 1, 2013.
  9. 9. Illustration (scrip dividend): Scrip dividends are declared in the amount of P200,000 payable in six months at 12% interest.
  10. 10. Illustration (stock dividend): Share capital, P100 par, 20,000 share authorized, 10,000 shares issued and outstanding.
  11. 11. Types of dividend policies
  12. 12. Stable dividend-per-share policy 1. Pay a predictable dividend every year. 2. Base optimal capital budget on residual retained earnings (after dividend).
  13. 13. Constant dividend-payout ratio 1. Pay a constant proportion of earnings (if positive). 2. Base optimal capital budget on residual retained earnings.
  14. 14. Compromise Policy Goals, ranked in order of importance Avoid cutting back on positive NPV projects to pay a dividend Avoid dividend cuts Avoid the need to sell equity Maintain a target debt/equity ratio Maintain a target dividend payout ratio Companies want to accept positive NPV projects, while avoiding negative signals
  15. 15. Residual-dividend policy 1 Determine the optimal capital budget. 2 Determine the retained earnings that can be used to finance the capital budget. 3 Use retained earnings to supply as much of the equity investment in the capital budget as necessary. 4 Pay dividends only if there are left-over earnings.
  16. 16. Factors that affect the amount of dividends paid • Legal requirements • Firm’s liquidity position • Repayment need • Expected rate of return • Stability of earning • Desire of control • Access to the capital market • Shareholder’s individual tax situation
  17. 17. Share capital dividends Funds raised by issuing shares in return for cash or other considerations. The amount of share capital a company has can change over time because each time a business sells new shares to the public in exchange for cash, the amount of share capital will increase. Share capital can be composed of both common and preferred shares.
  18. 18. Share splits The issuance of a substantial amount of additional shares, thereby reducing the par value of the share capital on a proportionate basis Often prompted by desire to reduce the market price per share, making it easier for small investors to buy shares
  19. 19. Share Capital repurchases A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. Share repurchase is usually an indication that the company's management thinks the shares are undervalued. The company can buy shares directly from the market or offer its shareholder the option to tender their shares directly to the company at a fixed price.
  20. 20. Problems: In 2012, Elm Company bought 10,000 shares of oil company at a cost of 200,000. On December 1, 2012 Elm Company declared a property dividend of the oil stock to shareholders of record on February 1,2013 payable on February 15, 2013. The oil stock had the following market value: December 1, 2012 - 250,000 December 31, 2012 - 260,000 February 15, 2013 - 270,000 What is the net change of the property dividend against retained earnings during 2012?
  21. 21. Problems: Tin Company had 700,000 ordinary shares authorized and 300,000 share outstanding on January 1, 2012. Jan 31 Declared 10% stick dividend June 30 Purchased 100,000 shares Aug 1 Reissued 50,000 shares Nov 30 Declared 2 for 1 share split How many ordinary shares are outstanding?
  22. 22. Problems: Lunario Company declared and distributed 10% stock dividend with fair value of P1.5M and par value of P1M and 25% stock dividend with fair value of P4M and par value of P3.5M. What agreeable amount should be debited to retained earnings for the stock dividends?
  23. 23. Problems: On January 1, 2013, the BOD of Chorva Company declared a cash dividend of 800,000 to shareholders of record on January 15, 2013 and payable on February 15, 2013. Selected data on December 31, 2012 are as follows: Accumulated depletion 500,000 Share capital 9,000,000 Share premium 300,000 Retained earnings (Dec 31, 2012) 600,000 Net income 2012 150,000 What amount should be reported as liquidating dividend?

Notes de l'éditeur

  • Declaration date is the day the Board of Directors announces its intention to pay a dividend. On this day, a liability is created and the company records that liability on its books; it now owes the money to the stockholders. On the declaration date, the Board will also announce a date of record and a payment date.

    Record date is the date established by an issuer of a security for the purpose of determining the holders who are entitled to receive a dividend or distribution.


    Ex-dividend date  classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be given ex-dividend status if a person has been confirmed by the company to receive the dividend payment.

    Payment date distribution of checks

×