Question

Dividend payout ratios on the Standard and Poor's 500 have dropped by around 50% since WWII....

Dividend payout ratios on the Standard and Poor's 500 have dropped by around 50% since WWII. This is support for which dividend payout theory?

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Answer #1

Dividend payout ratios on the Standard and Poor's 500 have dropped by around 50% since WWII,

The concept support to majortheories on dividend payout , althoough the dividend payout has been dropped , but the market capitalizations has been increased many fold from the WWII.

SO, Dividend is irrelevance for the capital structure as well as market value.

Sencond concept, Taxes can be an important factor for investors, capital gains are taxed at a lower rate than dividends.So low dividend will increase the market value of share. called Tax-Preference Theory.

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