Shareholder return - Dividends and dividend policy
9 important questions on Shareholder return - Dividends and dividend policy
What stage growth companies usually have a dividend policy? And why?
To help investors manage their expectations better
What companies usually profit from less downside risk in times of recession?
Why can it take years before a share price of a company recovers that cuts its dividend during a recession despite generating good cash flow across an economic cycle?
What is the consequence of this for a company?
Investors are only then willing to buy the shares at a significant discount in the future, i.e. The share price is likely to fall and remain suppressed for some time.
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There are two kinds of dividend policies. Name them:
- A company may choose to pay out a certain percentage of net earnings as dividends (70-90%).
- A company may choose to pay out dividends within a bandwidth of net earnings (30-60%).
For which companies is it typical to pay out a certain percentage of net earnings as dividends?
For which companies is it typical to pay out dividends within a bandwidth of net earnings? Why? What does it lead to?
Because it may additionally seek not to cut its dividends during economic downturns, but also not raise its dividends too strongly during phases of very strong earnings.
It leads to above-average valuation levels, i.e. The shares may trade at a premium to their peer group.
How come dividend policies are strongly influenced by key shareholders?
Why do companies often return cash to shareholders by means of special dividend (separate from the typical recurring dividends)?
Why do private-equity-controlled companies often have a quite aggressive dividend policy?
Therefore, many private equity companies tend to return cash to shareholders early, often financed by increasing the debt gearing (leverage) of a portfolio company's balance sheet.
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