Clientele effect
Dividend Policy
Residual $0.80 $ - $2.40 $0.04
Stable $1.00 $1.00 $1.00 $1.00
Constant P/O $1.20 $0.72 $1.92 $0.36
Low regular $0.91 $0.75 $1.39 $0.75
Dividend Policy in Practice
Dividend payment procedures:
Dividends are generally paid quarterly.
The following dates are important when
establishing a dividend policy:
Declaration date—the date the board of directors
states that a dividend will be paid to stockholders.
Holder-of-record date—the date the firm “opens” its
ownership books to determine who will receive
dividends.
Ex-dividend date—two working days before the
holder-of-record date (ex dividend means without
dividend).
Payment date—the date the firm mails the dividend
checks
Dividend Policy in Practice
Dividend reinvestment plans (DRIPS)—permit
stock-holders to have dividend payments
automatically reinvested in the firm’s stock.
Buy additional shares of a firm’s stock on a pro