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