Dividends get very little respect these days. In the last several years, they have accounted for only about 10 percent of investor total returns, but in the 100-year history of the Dow Jones Industrial Average, dividends have accounted for about 40 percent of investor returns; reinvest dividends and it's closer to half of total returns. Why do individual firms have such dramatically different dividend yields, and why do yields vary so much over time? How do managers go about making dividend-policy decisions, and is a carefully managed dividend policy worth the bother? These are some of the questions that Ronald C. Lease and his coauthors answer in Dividend Policy.
Have you ever felt you just knew something to be true, but you couldn't prove it? After careful review of all the theory and scientific evidence regarding the impact of corporate dividend policy, the authors conclude, "the benefit of a managed policy seems to escape theoretical modeling and systematic detection." Nonetheless, managers behave as though they believed dividend policy were important, and investors interpret dividend changes as signals of future profitability. The announcement of dividend changes, even the timing of the announcement, causes predictable changes in share prices and sends messages to the markets, which put a premium on dividend stability and gradual sustainable increases.
The book includes a brief history of the evolution of dividends, statistics on dividends relative to profits and capital investments, their importance as a component of investor total returns, the relationship of dividends to share price, how management makes dividend decisions, and the impact of different tax regulations on dividend policies. Dividend payouts also are contrasted with stock repurchases. It's all here for the corporate manager who sets dividend policy. For the investor, here's everything you ever wanted to know about dividends, and much you never thought to ask. --Scott Harrison
"Dividend Policy breathes new life into the classic dividends buybacks debate. This must-read book will challenge finance professors to rethink the common wisdom regarding optimal payout levels and help corporate executives and investors solve this part of the shareholder value puzzle."--Patrick S. McGurn, Director of Corporate Programs, Institutional Shareholder Service, Thomson Financial
"This is a comprehensive review of the current state of thinking about corporate payout policy. A well-reasoned, well-documented, and well-written book. I enjoyed it immensely and recommend it highly."--Clifford W. Smith, Jr., Louise and Henry Epstein Professor of Business Administration and Finance, William E. Emmons Graduate School of Business Administration, University of Rochester
is a welcome look at an important but often neglected dimension of corporate financial management. The integrated overview of academic research and its implications for corporate practice provides valuable insight into the prevailing wisdom on this subject."--Robert C. Higgins, Professor of Finance, University of Washington
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