The Dividend Puzzle

The Miller-Modigliani theorem says that the dividends a corporation pays do not affect the value of its shares or the returns to investors, because the higher the dividend, the less the investor receives in capital appreciation, no matter how the corporation's business decisions turn out. If th...

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Bibliographic Details
Published in:Journal of portfolio management 1997-08, Vol.23 (5), p.8-12
Main Author: Black, Fischer
Format: Article
Language:English
Subjects:
Capital gains
Costs
Dividend policy
Dividend reinvestment plans
Dividends
Economic theory
Investments
Investors
Portfolio management
Prices
Stockholders
Taxes
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Summary:The Miller-Modigliani theorem says that the dividends a corporation pays do not affect the value of its shares or the returns to investors, because the higher the dividend, the less the investor receives in capital appreciation, no matter how the corporation's business decisions turn out. If this theorem is correct, then a firm that pays a regular dividend equal to about half of its normal earnings will be worth the same as an otherwise similar firm that pays no dividends and will never pay any dividends.
ISSN:0095-4918
2168-8656
DOI:10.3905/jpm.1996.008