10
Ex-dividend
date:
the
date
following
cum-dividend
indicating
at
a
point
where investors who purchase the share will not receive dividend.
®
ecording
date:
shareholder
must
register
their
ownership
on
or
before
this date to be able to receive
the dividend.
Usually in
two business
days
after ex-dividend date.
Payment date: the dividend payment actually takes place on this date.
2.1.2.Dividend Policy
As stated
by Baker (2009, p3), dividend policy determines dividend decision:
will
the
firm
pay
dividend,
and
how
much
of
the
earnings
(payout
ratio)?
Dividend
decision
is
defined
as
a
type
of
financing decision
which
affects
the
amount
of
earnings of
a
firm of which
goes to dividend payment
versus the amount
it retains as
reinvestment. In
the
idealized world
using Miller and Modigliani
(1961) assumptions,
dividend
policy proved
to
be
irrelevant.
However
in
practical
corporate
finance,
it’s
arguably
very
important
to
balance
dividend
payout
and
retained
earnings.
If
too
much
is
paid
as
dividend
the
company may
need
to
raise
fund
from
financial
institutions which
may
have
attached
covenants,
incur
interest
expense,
and
underwriting
fee.
Thus,
according
to
Black
(1976)
retained
earnings
are
the
lowest
cost source of fund.
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