Dividend Policy: Theory and Practice
This text presents new ways to think about one of the most intriguing subjects in financial economics: dividends. It also explores the puzzle presented by dividends.
TABLE OF CONTENTS Dividend Policy: Theory and Practice
Part I: The Historical Evolution of Dividends
Chapter List
- Chapter 1: Introduction
- Chapter 2: The Evolution of the Modern Corporation in The Netherlands and the United Kingdom
- Chapter 3: The Evolution of the Modern Corporation in the United States of America
- Chapter 4: 200 Years of Dividend Practices
- Chapter 5: Dividend Reinvestment Plans A Puzzle within the Puzzle
- Chapter 6: Preferred Stock and Dividends A Revealing Divergence
Overview
The harder we look at the dividend picture, the more it seems like a puzzle with pieces that just don t fit together.
Black, 1976
Dividends are commonly defined as the distribution of earnings (past or present) in real assets among the shareholders of the firm in proportion to their ownership. There are three parts of this definition, all equally important.
The first is that dividends can be distributed only from earnings and not from any another source of equity, say, paid-in surplus.
The second is that dividends must be in the form of a real asset. It is common practice to pay dividends in cash (sent as a piece of paper) because of the convenience of the matter. It is hard to imagine that Boeing, for example, would send the right wing of a 747 as a dividend to one of its major stockholders. Regardless, evidence shows (from abroad) that some firms during high levels of inflation have paid dividends in the form of the product they were producing.
The third part of the definition states that all stockholders share in dividends relative to their holdings in the corporation. This part...
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