equity

chandniwadhwani92
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equity

Postby chandniwadhwani92 » Mon Nov 03, 2014 8:35 am

In collable common shares it is given it allows the firm to reduce its dividend payment without changing its per share dividend
How per share dividend wont b change when dividend payment is reudced

edupristine
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equity

Postby edupristine » Mon Nov 03, 2014 10:14 am

Callable Common Shares gives the firm the right to repurchase the stock at a pre- specified price. It benefits the firm because when the market price is great than the call price, the firm can call shares and reissue them at a higher price.

It allows firm to reduce its dividend payments without changing its per-share dividend.
Per Share Dividend = Total Dividend/ Total no of shares outstanding

Dividends can be reduced without changing its per share dividend by correspondingly decreasing the total no of shares outstanding (i.e the denominator). This can be done via exercising the option to buy back shares from the investors/shareholders.

In this way the total no of share outstanding will decrease. So even if you decrease total dividend payments (i.e the numerator), the per share dividend will remain constant.

chandniwadhwani92
Finance Junkie
Posts: 166
Joined: Mon Oct 06, 2014 7:36 am

equity

Postby chandniwadhwani92 » Fri Dec 12, 2014 3:12 pm

If both dividend payment and no.of shares outstanding are decreasing then how dividend per share is constant. It should increase. Can u explain wid examplle


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