Dividends and Dividend Policy

Topics: Dividend, Dividends, Stock Pages: 4 (1197 words) Published: October 30, 2011
Running Head: DIVIDENDS AND DIVIDEND POLICY: DOES DIVIDEND

Dividends and Dividend Policy: Does Dividend Policy Matter

Ronald Jones

University of Phoenix

August 21, 2011

Dividends and Dividend Policy: Does Dividend Policy Matter

According to Investor Dictionary, corporate finance is the specific area of finance dealing with the financial decisions corporations make, and the tools and analysis used to make the decisions. It may be divided as a whole between long term, capital investments decisions, and short term, working capital. Corporate finance entails many important topics. One important topic is the dividend policy. In order to fully understand dividends, you must know the different types of dividends, how they are paid, and the issues surrounding dividend policy decisions. The term dividend usually refers to cash paid out of earnings (Ross, Westerfield, & Jordan, 2011). It is the portion of corporate profits paid out to stockholders. Dividends usually come in several different forms. The basic types of cash dividends are as follows: regular cash dividends, extra dividends, special dividends, and liquidating dividends. Regular cash dividends are cash payments made directly to stockholders, usually each quarter or four times a year. Extra cash dividends mean that firms sometimes pay the regular cash dividend along with and extra cash dividend. This indicates that the extra amount may not be paid in the future. Special cash dividends are similar with the extra dividends with the exception that special dividends definitely will not be repeated in the past. Liquidating dividends simply means that some or the entire firm has been sold. A cash dividend can be expressed as either dollars per share, a percentage of market prices, or as a percentage of earnings per share. Dividends payments are made chronologically by declaration date, ex-dividend date, date of record, and date of payment. On the declaration date, the board of...

References: Baker, H.K. (2009). Dividends and dividend policy. Hoboken: John Wiley & Sons Inc.
Corporate Finance. (2011). Investor dictionary. Retrieved August 21, 2011, from http://www.investordictionary.com/definition/corporate-finance
Ross, S., Westerfield, R.W., & Jaffe, J. (2002). Corporate finance. New York: McGraw-Hill.
Ross, S., Westerfield, R., & Jordan, B. (2011). Essentials of corporate finance: 2010 custom edition (7th ed.). New York: McGraw-Hill.
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