03/09/2014
Distribution of dividend in share holder: Dividend is always given per share, annual meeting of company is called annual general meeting, in this they decide by voting.
Dividend payout ratio: It tells that how much part of profit we declare for dividend (yield) and then divide it on the total number of shares.
Optimal utilization: It means get maximum profit from your resources.
MM Theory by Marton Miller:
1) Dividend irrelevance theory: It says dividend is given or not. It creates no impact on share holder. They own decide their dividend policy, company not decides.
Tax on dividend
Tax on purchase/ sale of shares
If there is no tax on dividend, capital gain then this is better for share holders.
3) Bird in hand theory: Maximum use of current gain instead of running behind other gains. Enjoy current benefit or prefer current gains.
4) Tax preference theory: If your income is 995,000 and tax rate is 5%, you receive dividend of 6,000, your income now increase to 10,000 now your income will increase to 10,01000 now you have to pay tax of 7%. Therefore, you don’t want to receive dividend.
Always remember that there is high tax on dividend and low tax on capital gains.
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