dividend clientele

Examples of dividend clientele in the following topics:

• Impact of Dividend Policy on Clientele

  • Change in a firm's dividend policy may cause loss of old clientele and gain of new clientele, based on their different dividend preferences.
  • These investors are known as dividend clientele.
  • Clientele may choose to sell their stock if a firm changes its dividend policy, and deviates considerably from its preferences.
  • On the other hand, the firm may attract a new clientele group if its new dividend policy appeals to the group's dividend preferences.
  • These changes in demographics related to a stock's ownership due to a change of dividend policy are examples of the "clientele effect. "

• Expected Dividends, No Growth

  • A no-growth company would be expected to return high dividends under traditional finance theory.
  • This suggests that a particular pattern of dividend payments may suit one type of stock holder more than another; this is sometimes called the "clientele effect. " A retiree may prefer to invest in a firm that provides a consistently high dividend yield, whereas a person with a high income from employment may prefer to avoid dividends due to their high marginal tax rate on income.
  • If clienteles exist for particular patterns of dividend payments, a firm may be able to maximize its stock price and minimize its cost of capital by catering to a particular clientele.
  • No growth, high dividend stocks may appeal to value investors.
  • Describe how a company should make a dividend decision when it expect no growth

• Value of a Low Dividend

  • Furthermore, capital gains are taxed at lower rates than dividends.
  • However, under dividend irrelevance theory, the actual value of a dividend is inconsequential to investors.
  • The conflicting theories on dividend policy complicate interpretations of low dividends in real life.
  • Conversely, a low dividend yield can be considered evidence that the firm is experiencing rapid growth or that future dividends might be higher.
  • According to the clientele effect, firms offering low dividend payout will attract certain investors who are looking for a long term investment and would like to avoid taxes.

• Dividend Yield Ratio

  • The dividend-price ratio is a company's annual dividend payments divided by market capitalization, or dividend per share divided by the price per share.
  • The dividend yield or the dividend-price ratio of a share is the company's total annual dividend payments divided by its market capitalization, or the dividend per share, divided by the price per share.
  • There is no guarantee that future dividends will match past dividends or even be paid at all.
  • Others try to estimate the next year's dividend and use it to derive a prospective dividend yield.
  • Current dividend yield = Most recent Full-Year Dividend / Current Share Price

• Investor Preferences

  • The significance of investors' dividend preferences is a contested topic in finance that has serious implications for dividend policy.
  • Assuming dividend relevance, coming up with a dividend policy is challenging for the directors and financial manager of a company because different investors have different views on present cash dividends and future capital gains.
  • Investor preferences are first split between choosing dividend payments now, or future capital gains in lieu of dividends.
  • Further elements of the dividend policy also include:1.
  • Stable versus irregular dividends, and 3.

• Residual Dividend Model

  • The Residual Dividend Model first uses earnings to finance new projects, then distributes the remainder as dividends.
  • The Residual Dividend Model is a method a company uses to determine the dividend it will pay to its shareholders.
  • The Residual Dividend Model is an outgrowth of The Modigliani and Miller Theory that posits that dividends are irrelevant to investors.
  • It goes on to say that dividend policy does not determine market value of a stock.
  • The Residual Model dividend policy is a passive one and, in theory, does not influence market price because the same wealth is created for the investor regardless of the dividend.

• Defining Dividends

  • A dividend is allocated as a fixed amount per share.
  • When it is time to make dividend payments, corporations always pay preferred stock owners first, and then common stock dividends are allocated after all preferred dividends are paid in full.
  • Dividends may be allocated in different forms of payment, outlined below:Cash dividends are the most common.
  • In-dividend date is the last day, which is one trading day before the ex-dividend date, where the stock is said to be cum dividend ('with [including] dividend').
  • After this date the stock becomes ex-dividend.

• Dividend Payments and Earnings Retention

  • Dividends are payments made by a corporation to its shareholder members.
  • A dividend is allocated as a fixed amount per share.
  • Public companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a "special dividend" to distinguish it from the fixed schedule dividends.
  • Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends:
  • The dividend payout ratio is equal to dividend payments divided by net income for the same period.

• Stock Dividends vs. Cash Dividends

  • Stock dividends, unlike cash dividends, do not provide liquidity to the investors; however, they do ensure capital gains to the stockholders.
  • Cash dividends are immediately taxable under most countries' tax codes as income, while stock dividends are not taxable until sold for capital gains (if stock was the only choice for receiving dividends).
  • A further benefit of the stock dividend is its perceived flexibility.
  • For the firm, dividend policy directly relates to the capital structure of the firm, so choosing between stock dividends and cash dividends is an important consideration.
  • Assess whether a particular shareholder would prefer stock or cash dividends

• Dividend Reinvestments

  • Dividend reinvestment plans (DRIPs) automatically reinvest cash dividends in the stock.
  • In some instances, a company may offer its shareholders an alternative option to receiving cash dividends.
  • The shareholder chooses to not receive dividends directly as cash; instead, the shareholder's dividends are directly reinvested in the underlying equity.
  • This is called a dividend reinvestment program or dividend reinvestment plan (DRIP).
  • The name "DRIP" is generally associated with programs run by the dividend-paying company.