CFA二级R21 分红与回购分析

CFA二级Reading 21，Analysis of Dividends and Share Repurchases 的知识点概要。

Analysis of Dividends and Share Repurchases

• Dividends
  • Stock dividends and splits merely carve equity into smaller pieces and do not create wealth for shareholders.
  • KINDS
    • cash dividends
      • regular
        • represent a commitment to pay cash to stockholders on a quarterly, semiannual, or annual basis.
      • irregular
        • extra
    • stock dividends
    • stock splits
  • theories on investor preference for dividends
    • MM
      • given perfect markets dividend policy is irrelevant
    • “bird in hand” theory
      • investors value a dollar of dividends today more than uncertain capital gains in the future
    • taxable investors
      • in countries in which dividends are taxed at higher rates than capital gains,taxable investors should prefer that companies reinvest earnings in profitable growth opportunities or repurchase shares so they receive more of the return in the form of capital gains.
      • tax for dividends vs tax for capitial gain
  • clientele effect
    • different classes of investors have differing preferences for dividend income. Those who prefer dividends will tend to invest in higher yielding shares.
  • signaling
    • Dividend declarations may provide information to current and prospective shareholders regarding management’s confidence in the prospects of the company. Initiating a dividend or increasing a dividend sends a positive signal, whereas cutting a dividend or omitting a dividend typically sends a negative signal. In addition, some institutional, as well as individual, shareholders see regular cash dividend payments as a measure of investment quality.
    • Initiating a dividend or increasing a dividend sends a positive signal
  • conflicts of interest
    • reduce the agency conflicts between managers and shareholders
    • worsen conflicts of interest between shareholders and debtholders
  • several factors appear to influence dividend policy
    • investment opportunities for the company
    • the volatility expected in its future earnings
    • financial flexibility, tax considerations
    • flotation costs
    • contractual and legal restrictions
  • double taxation systems,
    • double taxation
      • corporate level
      • shareholder level
    • tax imputation systems
      • a shareholder receives a tax credit on dividends for the tax paid on corporate profits
    • split-rate taxation systems
      • corporate profits are taxed at different rates depending on whether the profits are retained or paid out in dividends
  • dividends restrictions
    • debt covenants and legal restrictions
  • dividends policy
    • stable dividend policy
      • a company tries to align its dividend growth rate to the company’s long-term earnings growth rate. Dividends may increase even in years when earnings decline, and dividends will increase at a lower rate than earnings in boom years.
      • [(Expected earnings × Target payout ratio – Previous dividend) × Adjustment factor]
        • Adjustment factor 1/N.预测未来5年，调整系数为1/5=0.2
    • constant dividend payout ratio policy
      • Using a constant dividend payout ratio policy, a company applies a target dividend payout ratio to current earnings; therefore, dividends are more volatile than with a stable dividend policy.
    • residual dividend policy
      • In a residual dividend policy, the amount of the annual dividend is equal to annual earnings minus the capital budget times the percent of the capital budget to be financed through retained earnings or zero, whichever is greater. An advantage of this policy to the company is that positive NPV opportunities have the first priority in the use of earnings.
      • NI-C*wc
• Repurchases
  • equivalent to the payment of a cash dividend
  • kinds
    • open market
    • tender offers occur at a fixed price
    • at a price range through a Dutch auction
    • Direct negotiations
      • Direct negotiations with major shareholders to get them to sell their positions are less common because they could destroy value for remaining stockholders.
  • financial impact
    • EPS
      • Share repurchases made with excess cash
        • increase EPS
      • with borrowed funds
        • after-tax borrowing rate>earnings yield
          • decrease EPS
        • after-tax borrowing rate=earnings yield
          • not affect EPS
        • after-tax borrowing rate<earnings yield
          • increase EPS
    • BVPS
      • BVPS : book value per share
      • buyback market price > BVPS, BVPS ↓
      • buyback market price < BVPS ,BVPS ↑
  • VS dividends
    • Companies can repurchase shares in lieu of increasing cash dividends.
      • more flexibility
        • Companies can repurchase shares in lieu of increasing cash dividends. Share repurchases usually offer company management more flexibility than cash dividends by not establishing the expectation that a particular level of cash distribution will be maintained.
    • Companies can pay regular cash dividends supplemented by share repurchases.
      • substitute for special cash dividends.
  • singaling
    • On the one hand, share repurchases can signal that company officials think their shares are undervalued.
    • On the other hand, share repurchases could send a negative signal that the company has few positive NPV opportunities.
• dividends safety
  • dividends coverage ratio
    • FCFEE/(dividends+repurchases)
  • payout ratio
    • dividends/earnings
  • the level of dividend yield
    • 过高的股息收益率可能不可持续
  • whether the company borrows to pay the dividend
  • past dividend record