Política de dividendos

Introduction to Dividend Policy

Overview of the Presentation

• Miguel Ángel López and Luis Antonio Ramírez Majida, students from UNAM, introduce their topic on corporate finance under Professor Argenis Iván Mejía Chavarría.

Importance of Dividend Policy

• Discusses the significance of dividend policy in business planning, emphasizing it as a strategic action plan for distributing dividends while considering various implications.

Financial Impact of Investments

• Highlights that investments aim to generate returns, which are translated into dividends; stresses the need for financing sources and the role of profits as a form of financing.

Understanding Dividends

Definition and Significance

• Defines dividends as distributable profits paid to shareholders per share owned, either in cash or stock. Emphasizes their periodic nature and economic rights granted to shareholders.

Types of Dividends

• Outlines different types of dividends:

• Interim Dividends: Paid before annual accounts approval based on estimated profits.

• Final Dividends: Distributed after finalizing accounts based on actual results.

• Extraordinary Dividends: Resulting from exceptional profit generation.

• Fixed Dividends: Set by the company regardless of performance.

• Gross vs. Net Dividends: Gross is before taxes; net is after tax deductions.

• Script Dividend: Paid in shares instead of cash.

The Role and Objectives of Dividend Policy

Regulation and Management

• Explains that dividend policy regulates how dividends are distributed without jeopardizing company growth or interests, ensuring financial stability.

Key Objectives

• Identifies two primary objectives:

• Intelligent distribution of company benefits.

• Providing sufficient financing for operations while balancing retained earnings with shareholder payouts.

Considerations in Formulating Dividend Policy

Clarity and Attractiveness to Investors

• Stresses that companies must clearly communicate their dividend policies to attract investors through fresh capital contributions.

Restrictions Affecting Dividend Payments

• Discusses various restrictions impacting dividend payments:

• Legal Restrictions: Common dividends cannot be paid until preferred ones are settled; payments must not exceed retained earnings.

• Contractual Limitations: Debt contracts may restrict dividend payments until certain financial metrics improve (e.g., liquidity ratios).

• Internal Constraints: Availability of cash affects payment methods; debt may be used if liquidity is low.

• Growth Prospects: Alternative capital sources and investment opportunities influence decisions on retaining earnings versus paying out dividends.

Investment Opportunities and Dividend Policies

Considerations for Shareholders and Market Dynamics

• The desire of shareholders often leans towards immediate profits rather than future earnings, influencing investment opportunities.

• Dividend policies are not independent decisions; they must consider capital budgeting and the company's capital structure.

Stages of Company Development and Dividend Payments

• Companies progress through four stages: development, growth, expansion, and maturity, each affecting dividend policies differently.

• In the development stage, small companies typically do not pay dividends as they reinvest profits into new productive assets to reach growth.

• During the growth phase, while initial dividends may be in stock form, cash dividends can begin to emerge as profitability increases but remain low due to ongoing investment needs.

Expansion Stage Insights

• In the expansion stage, returns on investments may decrease due to increased market competition; however, companies might start paying higher cash dividends as asset expansion slows down.

• By the maturity stage, companies usually maintain stable sales growth with potential dividend payouts ranging from 35% to 40% of profits.

Understanding Preferred Shares

• Preferred shares have priority over common shares regarding dividend payments and asset claims during bankruptcy situations. They are generally considered perpetual securities without a maturity date.

• Holders of preferred shares receive fixed dividends before any distributions are made to common shareholders; this provides a safety net in case of company liquidation.

Valuation Formulas for Preferred Shares

• Two key formulas exist: one for evaluating preferred shares based on annual fixed dividends and expected growth rates; another calculates preferred dividends considering risk factors specific to the country where the company operates.

• For example, if a corporation requires a preferred dividend calculation with given values (e.g., 78 pesos for common shares), applying these formulas yields a required preferred dividend amount (e.g., 105.3 pesos).

Differences Between Common and Preferred Shares

• Common shares typically offer higher returns but come with greater risks compared to preferred shares which provide lower returns but significantly reduced risk exposure for investors.

Dividend Payment Procedures

• All shareholders entitled to economic rights receive dividends based on their ownership percentage; payments can occur semi-annually or annually depending on corporate policy.

• Extraordinary dividends may also be issued outside regular schedules under certain circumstances determined by shareholder meetings that decide payment amounts based on project funding needs or other considerations.

Dividend Payment Procedures and Considerations

Key Dates in Dividend Payments

• The process of paying dividends begins with the declaration date, where the board announces the decision to pay dividends to shareholders.

• The ex-dividend date follows, marking a cutoff for new shareholders; those purchasing shares after this date will not receive dividends.

• The record date is crucial as it determines which shareholders are eligible for payment; only registered holders by this date will receive dividends.

• Finally, the payment date occurs, typically one week after the record date, when actual dividend payments are made to eligible shareholders.

Methods of Dividend Payment

• Dividends can be paid either in cash or in additional shares; cash dividends come from company profits distributed proportionally among shareholders.

• Stock dividends are often issued when a company lacks sufficient capital for cash payments or wishes to reinvest funds while still rewarding shareholders with equity.

• Choosing between cash and stock dividends depends on company strategy: stock options may attract investors while cash provides immediate benefits to current shareholders.

Tax Implications and Payment Modalities

• Cash dividend payments can be processed through bank deposits, checks mailed to addresses, or checks picked up at company offices; shareholder preferences influence these methods.

• A company's dividend policy outlines how it meets obligations to its investors regarding profit distribution and considers both psychological factors and future financing needs.

Practical Example of Dividend Distribution

• An example illustrates a company with assets worth 100,000 pesos deciding to distribute 75% of accumulated earnings as cash dividends while capitalizing 15%.

• After distributing 26,250 pesos in cash (75% of available earnings), the company's total assets decrease accordingly due to cash outflow from dividend payments.

• Following this distribution, adjustments are made in financial records reflecting reduced equity and changes in accumulated results post-dividend payout.

Capitalization and Dividend Policy Insights

Overview of Capital Structure Changes

• The initial accumulated results lead to a social capital increase to 45,250, with final accumulated results at 3,500. This sets the new equity structure at 53,750 after cash dividends distribution and profit capitalization.

• The effects of profit capitalization indicate that if the nominal value remains at one peso per share, there will be 45,250 shares total: 40,000 initial shares plus 5,250 newly released shares from capitalization.

Share Value Adjustments

• The company releases 5,250 shares valued at one peso each; thus the book value per share adjusts to 1.18. If maintaining the original number of shares (40,000), the nominal value must change to 1.13 per share.

• In scenarios where no additional shares are issued through capitalization, the book value can rise to 1.34 per share. This highlights how dividend policies impact shareholder equity based on whether dividends are paid in cash or stock.

Importance of Dividend Policy

• A well-defined dividend policy is crucial for companies as it significantly influences their market perception and attractiveness to current and potential shareholders.

• An inadequate dividend policy may harm a company's image among investors. It’s essential that this policy aligns with both shareholder interests and corporate growth objectives without hindering future profitability.

• Establishing an appropriate dividend strategy should balance immediate shareholder returns with long-term growth potential for reinvestment opportunities that benefit all stakeholders involved.