[Verse 1] When companies make profits, what should they do? Keep the cash inside or share it with you? Miller and Modigliani said it doesn't matter at all Dividend policy won't make your stock rise or fall But others disagree, let me tell you why Some theories suggest your returns can fly [Chorus] Dividends flow, repurchases grow Bird in the hand or let the money go Stable payments, constant rates Residual cash, whatever it takes Share buybacks boost the price per share Tax effects show investors care [Verse 2] Bird in the hand theory says cash today Is worth more than promises of future pay Tax preference argues capital gains are best Lower tax rates put more money in your chest Clientele effect means different folks want different things Retirees love dividends, young investors want capital swings [Chorus] Dividends flow, repurchases grow Bird in the hand or let the money go Stable payments, constant rates Residual cash, whatever it takes Share buybacks boost the price per share Tax effects show investors care [Verse 3] Signaling theory says dividends send a sign When management pays out, the future looks fine Three policies guide how companies decide Stable dividend keeps payments by your side Constant payout ratio means a fixed percent Residual dividend pays what's left after investment [Bridge] Open market purchases happen every day Tender offers set a price that companies pay Dutch auction lets the market find the rate Stock splits and stock dividends don't change your fate Just more shares at lower price, the value stays the same It's all about the total wealth in this financial game [Chorus] Dividends flow, repurchases grow Bird in the hand or let the money go Stable payments, constant rates Residual cash, whatever it takes Share buybacks boost the price per share Tax effects show investors care [Outro] When shares go down but earnings stay Your EPS will rise that day Book value changes with each buy These theories help explain just why
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