Chapter 17: Payout policy

Return cash to shareholders either by paying a dividend or by buying back their stock.
Decision about how much cash to distribute is often mixed up with other financing and investment decisions.
We must isolate payout policy from other financing decisions.
The proportion of companies paying a dividend has declined.
Rule 10b -18 (1982) protect firms in buying back.
Company are not allowed to pay a dividend out of legal capital, which is generally defined as the par value of outstanding shares.
Stock dividends. This chapter focuses on cash dividends.
The information in dividend and stock repurchase.
Investors cant read managers' minds but they can learn from managers' actions.
Higher dividend prompts a rise in the stock price, whereas a dividend cut results in a fall in price.
Notice that investors do not get excited about the level of a company' dividend, they worry about the Change, which they view as an important indicator of the sustainability of earnings.

Inference is fundamentally the function of Yin & Yang ^^. This shows that ..etc. Finance is a great illustration of Yin Yang.

Information Content of Share Repurchase.
An application of Finance: who know the information first is the Winner. Speed.
The payout controversy.
Does payout policy change the value or simply signal of its value?
1. Dividend policy is Irrelevant.
Investors do not need dividends to get their hands on cash, they will not pay higher prices for the shares of firms with high payout.