dividend
cash paid out of earnings
distribution
payment made from sources other than current or accumulated retained earnings
regular cash dividends
most common type of dividend
-cash payments made directly to shareholders and made in the regular course of business
declaration date
-january 15th the board of directors passes a resolution to pay a dividend of $1 per share on February 16th to all holders of record as of January 30th
Ex-dividend date
makes sure all the checks go to the right people
-established by brokerage firms and stock exchanges
-the date is two business days before the date of record. if you buy the stock before this date, then you are entitled to the dividend. if you buy on the
date of record
*following the previous example
-the corporation prepares a list on Jan. 30th (date of record) of all individuals believed to be stockholders.
date of payment
dividends check mailed on feb. 16th
dividend policy is
irrelevant
clientele effect
states that different groups of investors desire different levels of dividends
repurchase
-a corporation buying back its own stock
have become increasingly popular and the amount spent on them is huge
stock dividend
not a true dividend because it is not paid in cash
-the effect is to increase the number of shares that each owner holds
stock split
essentially the same as a stock dividend except that it is expressed as a ratio
trading range
firms split stock to keep the price in this trading range
the crux of dividend policy is whether the firm should pay out money to its shareholders or take that money and
invest it for shareholders