五粮液派息除权案例

CORPORATE FINANCE,International Finance College Lan Yu Ping (Associate Professor),Chapter 14,Dividends and Dividend Policy,2,Key Concepts and Skills,Understand dividend types and how they are paid Understand the issues surrounding dividend policy decisions Understand the difference between cash and stock dividends Understand why share repurchases are an alternative to dividends,3,14 Chapter Outline,14.1 Cash Dividends and Dividend Payment 14.2 Does Dividend Policy Matter? 14.3 Establishing a Dividend Policy 14.4 Stock Repurchase: An Alternative to Cash Dividends 14.5 Stock Dividends and Stock Splits,4,14.1 Dividends Types,“Two handed lawyer” problem P420 Pay high dividends? Pay low dividends?,5,14.1.1 Cash Dividends,Regular cash dividend cash payments made directly to stockholders, sometimes each quarter Extra cash dividend indication that the “extra” amount may not be repeated in the future Special cash dividend similar to extra dividend, but definitely wont be repeated Liquidating dividend some or all of the business has been sold,6,五粮液派息除权案例,分红年度 分红方案说明每股收重点提示 益(元) 2006-12-31以总股本2711404800股为基数，0.432 公布日期:2007-04-25 向全体股东10派人民币0.60元( 股权登记日:2007-04-30 含税)(税后0.140元)送4股 除权除息日:2007-05-08 股息到帐日:2007-05-08 红股上市日:2007-05-08,7,8,14.1.2 Dividend Payment,Trading and settlement date-T+2? Declaration Date Board declares the dividend and it becomes a liability of the firm Ex-dividend Date (除权日Ex:无权得到，不包括) Occurs two business days before date of record If you buy stock on or after this date, you will not receive the dividend Stock price generally drops by about the amount of the dividend Date of Record Holders of record are determined and they will receive the dividend payment Date of Payment checks are mailed,9,Figure 14.2 The Ex-Day Price Drop,10,14.2 Does Dividend Policy Matter?,Dividends matter the value of the stock is based on the present value of expected future dividends Dividend policy may not matter Dividend policy is the decision to pay dividends versus retaining funds to reinvest in the firm In theory, if the firm reinvests capital now, it will grow and can pay higher dividends in the future,11,14.2.1 Illustration of Irrelevance,Example on P423-424 Wharton is all-equity firm and will dissolve in two years; The expected cash flow is $10000 in one year and $10000 in two years; Case 1: Expected dividends $100 in year 1 and $100 in year 2 Then the market value is $173.55 (sum of present values of two years dividends).,12,14.2.1 Illustration of Irrelevance枝节问题,Example on P423-424 Case 2: Expected dividend is $110 in year one and therefore Wharton must raise $1000 by issuing 10 new shares at 10% yield. The expected dividend become $89 in year two (10000-1100)/100. Then the market value is also $173.55 (sum of present values of two years dividends) If the company will earn the required return, then it doesnt matter when it pays the dividends,13,14.2.2 Low Payout？,Why might a low payout be desirable? Individuals in upper income tax brackets might prefer lower dividend payouts, with the immediate tax consequences, in favor of higher capital gains Flotation costs (筹资成本) low payouts can decrease the amount of capital that needs to be raised, thereby lowering flotation costs Dividend restrictions debt contracts might limit the percentage of income that can be paid out as dividends,14,14.2.3 High Payout？,Why might a high payout be desirable? Desire for current income Individuals in low tax brackets Groups that are prohibited from spending principal (trusts and endowments） （信托与养老保险)-they need to pay profit to the investment regularly. Uncertainty resolution no guarantee that the higher future dividends will materialize Taxes Dividend exclusion for holders of corporations Tax-exempt investors dont have to worry about differential treatment between dividends and capital gains,15,14.2.4 Clientele Effect(客户效应),Some investors prefer low dividend payouts and will buy stock in those companies that offer low dividend payouts Some investors prefer high dividend payouts and will buy stock in those companies that offer high dividend payouts。 Clientele effect: the argument that stocks attract particular groups based on dividend yield and the resulting tax effects.,16,14.2.5 Implications of the Clientele Effect,What do you think will happen if a firm changes its policy from a high payout to a low payout? What do you think will happen if a firm changes its policy from a low payout to a high payout? If this is the case, does dividend POLICY matter?,17,14.2.6 Information Content of Dividends,Stock prices generally rise with unexpected increases in dividends and fall with unexpected decreases in dividends Does this mean that the average investor prefers a high dividend payout ratio? No changes in the dividend send a signal about managements view concerning future prospects,18,14.3 Dividend Policy in Practice,Following are optional dividend policies: Residual dividend policy(残余股息政策): the firms objective is to meet its investment needs and maintain its desired debt-equity ratio before paying dividends; Constant growth dividend policy dividends increased at a constant rate each year Constant payout ratio pay a constant percent of earnings each year Compromise dividend policy(折中股息政策),19,14.3.1 Residual Dividend Policy,Determine capital budget Determine target capital structure Finance investments with a combination of debt and equity in line with the target capital structure Remember that retained earnings are equity If additional equity is needed, issue new shares If there are excess earnings, then pay the remainder out in dividends,20,14.3.1.1 Example Residual Dividend Policy,Given Need $5 million for new investments Target capital structure: D/E = 2/3 Net Income = $4 million Finding dividend 40% financed with debt (2 million) 60% financed with equity (3 million) NI equity financing = $1 million, paid out as residual dividends The new investment will be financed by 3m retained earning and 2m new debt, while the D/E ratio remains as 2/3,21,14.3.2 Compromise Dividend Policy,Goals, ranked in order of importance Avoid cutting back on positive NPV projects to pay a dividend Avoid dividend cuts Avoid the need to sell equity Maintain a target debt/equity ratio Maintain a target dividend payout ratio Companies want to accept positive NPV projects, while avoiding negative signals,22,14.4 Stock Repurchase (股票回购),Company buys back its own shares of stock Tender offer 标价收购 company states a purchase price and a desired number of shares Open market buys stock in the open market Example on P430-431 Similar to a cash dividend in that it returns cash from the firm to the stockholders This is another argument for dividend policy irrelevance in the absence of taxes or other imperfections,23,14.4.1 Real-World Considerations,Stock repurchase allows investors to decide if they want the current cash flow and associated tax consequences Investors face capital gains taxes instead of ordinary income taxes (capital gains tax is lower) In our current tax structure, repurchases may be more desirable due to the options provided stockholders The IRS recognizes this and will not allow a stock repurchase for the sole purpose of allowing investors to avoid taxes,24,14.4.2 Information Content of Stock Repurchases,Stock repurchases sends a positive signal that management believes that the current price is low Tender offers send a more positive signal than open market repurchases because the company is stating a specific price The stock price often increases when repurchases are announced,25,14.4.3 Stock Repurchase Announcement (公告),“America West Airlines announced that its Board of Directors has authorized the purchase of up to 2.5 million shares of its Class B common stock on the open market as circumstances warrant over the next two years “Following the approval of the stock repurchase program by the companys Board of Directors earlier today. W. A. Franke, chairman and chief officer said The stock repurchase program reflects our belief that America West stock may be an attractive investment opportunity for the Company, and it underscores our commitment to enhancing long-term shareholder value. “The shares will be repurchased with cash on hand, but only if and to the extent the Company holds unrestricted cash in excess of $200 million to ensure that an adequate level of cash and cash equivalents is maintained.”,26,14.5 Stock Dividends and Stock splits (红股与拆股),Current stockholders receive extra shares in free.,27,14.5.1 Stock dividends,Pay additional shares of stock instead of cash as dividends; Increases the number of outstanding shares; Small stock dividend Less than 20 to 25% If you own 100 shares and the company declared a 10% stock dividend, you would receive an additional 10 shares in free Large stock dividend more than 20 to 25%. Large stock dividend has the same effect as a stock split.,28,15.5.2 Stock Splits （拆股）,Stock splits essentially the same as a stock dividend except expressed as a ratio For example, a 2 for 1 stock split is the same as a 100% stock dividend Stock price is reduced when the stock splits Common explanation for split is to return price to a “more desirable trading range”,29,Quick Quiz,What are the different types of dividends and how is a dividend paid? What is the clientele effect and how does it affect dividend policy relevance? What is the information content of dividend changes? What is the difference between a residual dividend policy and a compromise dividend policy? What are stock dividends and how do they differ from cash dividends? How are share repurchases an alternative to dividends and why might investors prefer them?,