Purchase Solution

Definitions: Dividend Policy, Stock Repurchase, Stock Splits

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Please define dividend policy, stock repurchases and stock splits. Provide examples of how investors may react differently if their company issues dividends or announces a stock split or stock repurchase.

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Solution Summary

This solution defines dividend policy, stock repurchases and stock splits. It looks at how investors may react depending on the action (dividend, repurchase, split) taken. Examples are provided.

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Dividend Policy
Dividend policy can be a “Regular” cash dividend which would be a quarterly cash payment to stockholders. It could be an “Extra” cash dividend with indication it will not be repeated in the future. It could be a “Special” cash dividend which is an “extra” cash dividend that will not be repeated in the future. It could be a “Liquidating” dividend if the business is being sold.

Investor Reaction
Investors like this option as it is seen as a return on Investment. However some ...

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