This chapter starts by describing different types of cash payouts by U.S. companies. There are two ways in which a firm can distribute cash to the shareholders—dividend and stock repurchase. The information content in dividends and share repurchases is explained in detail. It covers the dividend controversy in great detail by discussing the three schools of thought—the rightists, the radical left, and the middle-of-the-roaders — associated with the issue. Miller and Modigliani’s Proposition on dividend irrelevance is illustrated using examples. The chapter ends with a discussion on tax systems of other countries including imputation tax system.
