| Term | Definition |
|---|
| Regular Dividend | dividend that firm expects to continue paying |
| Extra/Special Dividend | dividend that may or may not be repeated |
| Liquidating Dividend | dividend used to liquidate the firm once creditors are paid and Retained Earnings =0 |
| Payment in kind | dividend paid in product of firm |
| Stock Dividend | distribution of shares rather than cash |
| Declaration Date | board of directors declares that firm will pay dividend |
| Date of Record | whoever recorded as owning the stock on this date is eligible for dividend (established by Board of Directors) |
| Ex-dividend Date | 2 business days prior to date of record; |
| Ex-dividend Date | anyone who buys stock on or after this date does not receive dividends (date set by Securities Industry) |
| Payment Date | day the check is mailed |
| Bond Covenants | restrict dividends to protect B/H |
| Impairment of Capital Laws | dividends can't reduce R/E below 0; protects B/H's |
| Improper Accumulation Laws | prevents S/H from avoiding taxes by not paying dividends |
| Stock Repurchase | firm purchases shares from existing S/H's |
| Targeted Repurchase | is a technique used to thwart a hostile takeover in which the target firm purchases back its own stock from an unfriendly bidder, usually at a price well above market value. |
| Green Mail | is a corporate acquisition strategy for generating large amounts of money from the attempted hostile takeovers of large, often undervalued or inefficient companies. |
| Tender Offer | Firm offers to buy a fixed number of shares at a fixed price. Then S/H's tell firm how many shares want to sell. |
| Transferable Put Rights | Company issues 1 put right to existing S/H's for every X shares owned; may give up several put rights per share |
| Excess Cash | cash that is left after all positive NPV projects taken |
| Tax Arbitrage | certain tax provisions allow investors to earn dividends without paying taxes such as pension plans; result: pool of high dividend stocks go up and pool of low dividend stocks go down |
| Signaling | Idea that dividend announcements tell of management's expectations about future earnings and CFs |
| Agency | Conflict between the S/H's and management |
| Agency | Theory that if firms increase dividends today, they increase the potential for future monitoring that keep management acting in S/H's interests today |
| S/H-B/H Conflict | theory that when pay a dividend, less cash remains with which B/H can be paid; result: S/H gain at expense of B/H |
| Clientele Effect | Theory that dividends are irrelevant once reach equilibrium and firms can't increase/decrease value by changing dividend payouts because investor's attitudes towards dividend payments depends on investor's tax bracket |
| Brennan, Litzenberger, and Ramaswamy | found a positive relationship between expected pre-tax returns and dividend yield |
| Black and Scholes, Miller and Scholes | found no relationship between expected pre-tax returns and dividend yield |
| Fama and French | found positive relationship between expected return and ratio of book-to-market for equity (value stocks tend to have higher dividend yields). Concluded that any relationship between expected return and dividend yield is driven by the relationship between return and the book to market ratio |
| Value Stocks | stocks that have a high book-to-market ratio |
| Growth Stocks | stocks that have a low book-to-market ratio |
Combine with other sets
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