15

Dividend Theory

“For the most part, companies desire to give their shareholders a steady and dependable return without losing sight of the companies’ long-term and short-term needs for funds.”

 

Alexander Robichek1

LEARNING OBJECTIVES

After reading this chapter, you will be able to:

  1. Understand the various dividend theories and arguments.

  2. Understand the relevance of dividends with Gordon and Walter's model.

  3. Understand the irrelevance of dividends with MM model.

  4. Understand the free cash hypothesis and bird-in-hand argument of dividend theories.

FINANCE IN PRACTICE

In 1963, the Unit Trust of India (UTI) was established by an act of parliament. It was set up by the Reserve Bank of India (RBI) and functioned under its regulatory and ...

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