[Verse 1] When companies earn profits, what should they do? Miller-Modigliani said dividends don't matter to you Perfect markets make the choice irrelevant they claim But other theories challenge this financial game Bird-in-the-hand says cash today beats promises tomorrow While tax preference warns dividends bring tax sorrow [Chorus] Dividends flowing or shares buying back MM-Bird-Tax-Client-Signal track Stable payouts or constant ratio plans Residual policy fits expansion demands Open market, tender, Dutch auction way EPS climbing when shares drift away [Verse 2] Clientele effect groups investors by their taste High-tax brackets want growth, not dividend haste Signaling theory reads between the dividend lines Management confidence in these payout designs Three policies emerge from corporate boardroom talks Stable dividends smooth the market's random walks [Chorus] Dividends flowing or shares buying back MM-Bird-Tax-Client-Signal track Stable payouts or constant ratio plans Residual policy fits expansion demands Open market, tender, Dutch auction way EPS climbing when shares drift away [Bridge] Stock dividends multiply your paper count Stock splits slice prices down by same amount Neither adds value, just accounting sleight Book value per share takes the downward flight Repurchases shrink the denominator base Earnings per share quickens its pace [Verse 3] Open market purchases happen day by day Tender offers set a price and expiration way Dutch auctions let shareholders name their selling rate Three methods serve the same ultimate fate Fewer shares outstanding makes each one stronger Balance sheet equity grows no longer [Final Chorus] Dividends flowing or shares buying back MM-Bird-Tax-Client-Signal track Stable payouts or constant ratio plans Residual policy fits expansion demands Open market, tender, Dutch auction way EPS climbing when shares drift away [Outro] From theory to practice, the choices are clear Dividend policy shapes the financial year Whether cash distributions or buyback schemes Both serve shareholder wealth-building dreams
← Flotation Costs Impact | What Are Dividends and Why Do Companies Pay Them? →