Session 22: The Dividend Trade off - Good and Bad Reasons for Paying Dividends

We spent this session setting up the trade off on dividends, starting with the argument that Miller/Modigliani made that dividends don't matter (in a world where investors are taxed at the same rate on dividends & capital gains & stock issuance is costless) to the dividends are bad school (built on the almost century long higher tax on dividends) to the dividends are good school. We closed by looking at two bad reasons for paying dividends (that they are more certain, that you had a good year) and three potentially good reasons (to signal to market, to make your clientele happy and to take advantage of debt holders).Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr17/session22.pdfPost class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session22test.pdfPost class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session22soln.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices