CHAPTER 7

DIVIDENDS AND SHARE REPURCHASES: ANALYSIS1

Gregory Noronha, CFA

Tacoma, Washington, U.S.A.

George H. Troughton, CFA

Anthem, Arizona, U.S.A.

LEARNING OUTCOMES

After completing this chapter, you will be able to do the following:

• Compare theories of dividend policy and explain implications of each for share value, given a description of a corporate dividend action.
• Describe types of information (signals) that dividend initiations, increases, decreases, and omissions may convey.
• Explain how clientele effects and agency issues may affect a company’s payout policy.
• Explain factors that affect dividend policy.
• Calculate and interpret the effective tax rate on a given currency unit of corporate earnings under double-taxation, split-rate, and tax imputation dividend tax regimes.