Prepared by Instructor: E.Shatha Qamhieh Managerial Finance

An-Najah National University

Prepared by Instructor: E.Shatha Qamhieh Managerial Finance

Dividend Fundamentals

Retained Earnings: they are earnings that are not distributed to owners and are considered as an internal financing source.

Dividends: they are a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

payout policy: is the Decisions that a firm makes regarding whether to distribute cash to shareholders, how much cash to distribute, and the means by which cash should be distributed.

dividend policy The firm's plan of action to be followed whenever it makes a dividend decision.

4/16/2012

Managerial Finance-An-Najah university

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Dividend Fundamentals

Date of Record (dividends) : Set by the firm's directors, the date on which all persons whose names are recorded as stockholders receive a declared dividend at a specified future time.

ex Dividend: A period beginning 2 business days prior to the date of record, during which a stock is sold without the right to receive the current dividend.

Payment Date: Set by the firm's directors, the actual date on which the firm mails the dividend payment to the holders of record.

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Managerial Finance-An-Najah university

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Declaration Date: is the date when a firm's board of directors declare a dividend , they issue a statement indicating the dividend amount and setting important dates--the date of record, the ex-dividend date, and the payment date.

holders of record: are all persons whose names are recorded as stockholders on the date of record and they receive the current declared dividend.

Because of the time needed to make bookkeeping entries when a stock is traded, the stock begins selling ex dividend 2 business days prior to the date of record. Purchasers of a stock selling ex dividend do not receive the current dividend.

to determine the first day on which the stock sells ex dividend we subtract 2 business days from the date of record, if a 2 day weekend intervenes, subtract 4 days.

Ignoring general market fluctuations, the stock price is expected to drop by the amount of the declared dividends on the ex dividend date.

4/16/2012

Managerial Finance-An-Najah university

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Dividend Payment Time Line: It is the time line for the announcement and payment of a cash dividend

4/16/2012

Managerial Finance-An-Najah university

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