FI G U R E 7. 2 Options for Retained Earnings
Why might certain individuals prefer dividends to capital gains?
High-growth companies will often hold retained earnings to help grow
Financial transaction costs
which is imposed at 2.5% on income allocated specifically for Zakat.
7.3a Cash Dividends
Payout ratio
A company is currently trading at SAR 200 per share. The company announces a dividend of SAR 6 per share.
Yield
The average yield of dividend-paying companies on the Saudi Exchange
The first step is the dividend meeting of the company’s board of directors.
Date of record
Ex dividend
Pay date / Distribution date
Why might a company’s management decide to maintain a stable dividend?
If a stock were selling for SAR 50 and paid a SAR 2 dividend, the stock
A stock is trading at SAR 40 and announces a dividend of SAR 3 per share.
7.3b Share Dividends
Share dividends
assets and liabilities. Since assets are neither increased nor decreased, share
An investor owns 100 shares of stock trading at SAR 10. The company announces a share dividend at a rate of 1 for every 10 an investor owns.
Dilution
Fahd needs to determine if a share dividend would increase
7.3c Stock Splits
Stock split
If a stock is selling for SAR 54 a share and is split three for two, then the price of the stock after the split will be:
If a stock is selling for SAR 5.5 a share and there is a reverse split of one for two, what would the price of the stock be after the reverse split?
Fahd is evaluating whether he should recommend to the board that the
7.3d Repurchase of Stock
FI G U R E 7. 3 Stock Strategies
FI G U R E 7. 3 continued Stock
A stock dividend paid from company profits reduces a firm’s total equity.
Dividends are paid on the:
A share dividend:
