Chapter 12: The Dividend Puzzle

The following sections are included:

• Introduction

• How Dividends are Paid

  • Factors influencing dividend policy

  • Dividend forms and payment procedures

  • Stock repurchase

  • Inflation accounting and corporate dividends

• Dividend Payment Determination

  • Residual theory

  • Lintner’s model

  • Stable dividend policy

  • Information content of dividends — A synthesis

  • Double taxation

• Stock Dividends, Stock Splits, and Stock Repurchases

  • Stock dividends and stock splits

  • Stock repurchase

• The Capital Asset Pricing Model with Dividend Effects

  • Some empirical evidence

  • Determinants of dividend policy

• The Irrelevance of Dividend Policy

  • Homemade dividends

  • Assumptions used to obtain the conclusions of Modigliani and Miller

  • Clientele effects

  • Dividend information content — A synthesis

  • Short-run versus long-run dividend effects

• Critique on M&M Dividend Irrelevance of Dividend Policy

• Summary

• Appendix 12A — Partial Adjustment Dividend Payment Model — JNJ as Case Study