Changing Perspectives on Corporate Payout Policy: From Cash Dividends to Share Repurchase

Abstract

Considerable evidence exists that investors' high regard for regular dividend payments is well-founded. Dividends are tangible cash flow streams that give stocks their intrinsic value, in addition to lowering risk and communicating managers' good long-term intentions. Despite these benefits, however, the changing nature of firms dominating the U.S. economy and managers' desire for increased flexibility make it likely investors will continue receiving more payments in the form of share repurchase for the foreseeable future.