Corporate Finance MBA Spring 2021 - Session 23: Actual versus Potential Dividends and Cash/Trust Nexus

In this session, we started by looking at one good reason for paying dividends, including having an investor base that likes dividends, one iffy reason (dividends as a signal) and one borderline reason (that you can rip of lenders). We then looked at three questions that need to be asked in assessing dividend policy, starting with how much a company can afford to return to stockholders (FCFE), then looking at how much is actually returned in dividends and buybacks and finally assessing whether you trust management enough to give them the freedom to set dividend policy. Next session, we will put this framework into practice byy asking and answering these questions with the companies that we are examining in this class: Vale, Tata Motors and Baidu. Slides: http://www.stern.nyu.edu/~adamodar/podcasts/cfspr21/session23slides.pdf Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session23test.pdf Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session23soln.pdf