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FINANCIAL MARKET COURSES

Dividend Policy

Dividend policies can differ radically between companies. This course looks at the reasons why such differences in dividend policy can occur. The central question that is addressed is whether dividend policy can affect the value of a firm. In an ideal world, it would not; this is the crux of the dividend irrelevance proposition of Modigliani-Miller that is examined in detail here. Two other theories of dividend policy - the traditional and radical view - are also explained in detail.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Describe how dividends are paid

    Explain the difference between the classical and radical view of the dividend payment decision

    Demonstrate how the Modigliani-Miller approach to dividend policy reached its conclusions and what its weaknesses are

  • COURSE OUTLINE

    Topic 1: The Payment of Dividends

    Dates for payment of Dividend

    o Declaration Date With-dividend date

    o Ex-dividend Date

    o Record Date

    o Payment Date

    Types of dividend Payment Policy

    o Pure residual policy

    o Constant dividend payment ratio

    o Long-run residual dividend policy

    o Smoothed dividends policy

    Topic 2: The Dividend Payment Decision

    Classical View

    Radical View

    Topic 3: Dividend Policy

    Types

    o Cash dividend

    o Stock Dividend

    o Extra/Special dividend

    Limitations on dividend policy

    o Profitability

    o Liquidity

    o Government policy

    o Market Imperfections

    o Behaviour of Competitors

    Topic 4: Modigliani-Miller on Dividends

    Modigliani-miller

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    60 Minutes

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