Session 21: Dividends and Cash Return - First Steps
from Aswath Damodaran Hosted by Aswath Damodaran
We started this class with the third and final quiz of the class, before moving on to the dividend principle. We started with an assessment of what dividends would look like if they were truly residual cash flows before looking how they have evolved in practice - they are sticky, they follow earnings and the shift towards buybacks in recent decades, and how that shift can be explained by the increased desire for flexibility among companies that face more uncertainty about future earnings. We then moved on to two measures of dividend policy - dividend payout and yield, before looking at three schools of thought on dividends that cover the spectrum (dividends don’t matter, dividends are bad, dividends are good)., We ended the class by looking at two bad reasons for paying dividends (that they are more certain, that you had a good year). In the next class, we will talk about three good reasons for paying dividends as well as a way of measuring how much cash can be returned (FCFE).Slides: https://nyu.box.com/s/wqzbi9iifg4zc6gkkraegand13qkdspmPost class test: https://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session21test.pdfPost class solution: https://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session21soln.pdf
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