Explore BrainMass

Explore BrainMass

    Impact of dividend policy on stock price

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Why do firms choose to make large increases in their dividends or start a stock repurchase program? Why would they choose one of these payout methods over another?

    Why do firms choose to cut or eliminate their dividends? What usually happens to the stock price of a company that does this?

    © BrainMass Inc. brainmass.com October 10, 2019, 7:23 am ad1c9bdddf

    Solution Preview

    Based on my several years history of investing in stocks, I have noticed that whenever companies have extra cash that they don't plan on using to finance their expansion, they usually distribute this extra cash to shareholders. This distribution can be through an extra, special dividend or stock repurchase.

    The ...

    Solution Summary

    How does the method the company chooses to distribute cash to stockholders affect its prices?