The Corporation Dividend

Paper Summary:

This paper explains that, when the corporation makes a profit then they have to pay taxes on the profit that it earn, then this profit is distributed as dividends and there is a second tax at the time of this distribution. The author points out that companies regularly paying high dividends usually are associated with stable and high earning companies; however, it could be a trick by a company, which is not performing well, to make its share price appear to deserve higher ratings based on the dividend that it is paying. The paper relates that the process of finding out dividend yield for a publicly traded company requires knowing the shareholders' cash dividends and the price of the share on that date.

From the Paper:

"Another return to stockholders is suggested through share purchases and this is seen not to help the long term stock holders at all. When the company pays to the stockholders an amount more than the book value of the share, they are actually reducing the book value by that much. This is against the general purpose of the management of a company which should increase equity of shareholders at all times, buybacks at prices greater than book value does not achieve it. In the market situation of today, the shares of very few companies are sold at prices below the book value, and even when they do, the company itself may be financially very weak to conduct such a program."

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