Corporate Finance Spring 2024 - Session 23: Good & Bad Reasons for paying dividends

Master Corporate Finance: From Risk & Valuation to Capital Structure & Real-World Strategy

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What you'll learn

Analyze corporate decisions using the principles of shareholder wealth maximization and its alternatives.
Estimate the cost of capital for a firm using risk models, betas, and debt costs.
Evaluate investment projects and acquisitions using cash flow analysis and capital budgeting techniques.
Determine the optimal mix of debt and equity financing and design appropriate dividend policies.

This course includes

34.5 hours of video
Certificate of completion
Access on mobile and TV

Summary

Keywords

Corporate Finance

Full Transcript

In this session, we started by looking at some bad reasons for paying dividends and a couple of good ones, 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. Slides: https://pages.stern.nyu.edu/~adamodar/podcasts/cfspr24/session23slides.pdf Post class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/cfovhds/session23test.pdf Post class test solution: https://pages.stern.nyu.edu/~adamodar/pdfiles/cfovhds/session23soln.pdf