Response Discussion 5.2 | Business & Finance
Dividends
Response Guidelines
Respond to at least two peers (see attachment). Your responses should be substantive and could involve one or more of the following:
o Debate the topic.
o Ask a probing question.
o Share an insight you gained from your peer’s post.
o Make a suggestion.
o Share a personal experience related to the topic.
o Expand on your peer’s post.
Response Guidelines
Respond to at least two peers (see below). Your responses should be substantive and could involve one or more of the following:
o Debate the topic. o Ask a probing question. o Share an insight you gained from your peer’s post. o Make a suggestion. o Share a personal experience related to the topic. o Expand on your peer’s post.
Student 1
Dividend policies are guidelines a company uses to make decisions on how much or it’s earning they are willing to pay to shareholders. There are three different dividend policies, a residual dividend that depends on internal equity. Dividend stability policy is when dividends are paid quarterly. Hybrid dividend policy is a combination of residual and stability policies.
Stock repurchase is when a company stock is undervalued and the company purchases its own stock at a lower price. The company can purchase the stock and retire the stock or keep them as treasury stock.
A stock split is when a stock can be split into ratios 2 to 1, 3 to 1. Management may see a higher level of liquidity because they can be sold quicker.
Student 2
Dividend policy is how a company determines how much of the earnings will be paid out to investors. A stock buy-back option or repurchase is when a company recoups its own stocks off the market. Stock-splits occur when the company divides to increase the number of shares available to the company (Ross, et al., 2014). A stock-split is usually motivated by a company trying to increase investment in the company by making more shares available on the open-market at a much more “affordable” price to potential investors. Issuing dividends, much like a stock-split can give investors confidence in the performance of that investment. Issued dividends can infer that a company sees more positive reporting in future periods. This, much like a stock-split can be utilized to create interest and drive investors to the stock.
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Ross, Stephen, Westerfield, Randolph, Jeffrey, Jaffe, Jordan, Bradford. (2018). Corporate Finance: Core Principles and Applications, 5th Edition. [Vitalsource]. Retrieved fromhttps://online.vitalsource.com/#/books/1260384357/
