Chapter 17: Payout policy (II)

Right wing: Graham and Dodd: favour high payout: Dividend as spendable income. Agency cost: managers could overinvest.
Left: Tax. Market rewards firms that have low payout policies.
Low yield stock and high income individuals.
Investors usually interpret stock repurchases as an indication of managers' optimism.
Actions of companies reflect investors' preferences; thus the fact that companies pay substantial dividends is the best evidence that investors want them.
Tax effects: Investors demand higher returns from high payout stocks.