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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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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 ...

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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