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dividend growth method

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Definition of dividend growth method

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dividend growth method

a method of computing the cost
of common stock equity that indicates the rate of return
that common shareholders expect to earn in the form of
dividends on a company’s common stock



Related Terms:

algebraic method

a process of service department cost allocation
that considers all interrelationships of the departments
and reflects these relationships in simultaneous
equations


Allowance method

A method of adjusting accounts receivable to the amount that is expected to be collected based on company experience.


Average-Cost Inventory Method

The inventory cost-flow assumption that assigns the average
cost of beginning inventory and inventory purchases during a period to cost of goods sold and
ending inventory.


Benefit Ratio Method

The proportion of unemployment benefits paid to a company’s
former employees during the measurement period, divided by the total
payroll during the period. This calculation is used by states to determine the unemployment
contribution rate to charge employers.


Benefit Wage Ratio Method

The proportion of total taxable wages for laid off
employees during the measurement period divided by the total payroll during
the period. This calculation is used by states to determine the unemployment
contribution rate to charge employers.



Bootstrapping, bootstrap method

An arithmetic method for backing an
implied zero curve out of the par yield curve.


Capitalization method

A method of constructing a replicating portfolio in which the manager purchases a
number of the largest-capitalized names in the index stock in proportion to their capitalization.


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Cash dividend

A dividend paid in cash to a company's shareholders. The amount is normally based on
profitability and is taxable as income. A cash distribution may include capital gains and return of capital in
addition to the dividend.


cash dividend

Payment of cash by the firm to its shareholders.


Completed-Contract Method

A contract accounting method that recognizes contract revenue
only when the contract is completed. All contract costs are accumulated and reported as expense
when the contract revenue is recognized.


constant-growth dividend discount model

Version of the dividend discount model in which dividends grow at a constant rate.


Constant-growth model

Also called the Gordon-Shapiro model, an application of the dividend discount
model which assumes (1) a fixed growth rate for future dividends and (2) a single discount rate.


Critical Growth Periods

Times in a company's history when growth is essential and without which survival of the business might be in jeopardy.


Cum dividend

With dividend.


Cumulative dividend feature

A requirement that any missed preferred or preference stock dividends be paid
in full before any common dividend payment is made.


Current rate method

Under this currency translation method, all foreign currency balance-sheet and income
statement items are translated at the current exchange rate.


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Direct estimate method

A method of cash budgeting based on detailed estimates of cash receipts and cash
disbursements category by category.


Direct method

A method of preparing the operating section of the Statement of Cash Flows that uses the company’s actual cash inflows and cash outflows.



direct method

a service department cost allocation approach
that assigns service department costs directly to revenueproducing
areas with only one set of intermediate cost
pools or allocations


Direct-Method Format

A format for the operating section of the cash-flow statement that reports actual cash receipts and cash disbursements from operating activities.


Direct write-off method

A method of adjusting accounts receivable to the amount that is expected to be collected by eliminating the account balances of specific nonpaying customers.


Discounted dividend model (DDM)

A formula to estimate the intrinsic value of a firm by figuring the
present value of all expected future dividends.


Dividend

A dividend is a portion of a company's profit paid to common and preferred shareholders. A stock
selling for $20 a share with an annual dividend of $1 a share yields the investor 5%.


Dividend

A payment a company makes to stockholders. Earnings before income tax. The profit a company made
before income taxes.


Dividend

The payment of after-tax profits to shareholders as their share of the profits of the business for an accounting period.


Dividend

A payment made to shareholders that is proportional to the number of shares
owned. It is authorized by the Board of Directors.


dividend

Periodic cash distribution from the firm to its shareholders.


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Dividend

As the term dividend relates to a corporation's earnings, a dividend is an amount paid per share from a corporation's after tax profits. Depending on the type of share, it may or may not have the right to earn any dividends and corporations may reduce or even suspend dividend payments if they are not doing well. Some dividends are paid in the form of additional shares of the corporation. dividends paid by Canadian corporations qualify for the dividend tax credit and are taxed at lower rates than other income.
As the term dividend relates to a life insurance policy, it means that if that policy is "participating", the policy owner is entitled to participate in an equitable distribution of the surplus earnings of the insurance company which issued the policy. Surpluses arise primarily from three sources:
1) the difference between anticipated and actual operating expenses,
2) the difference between anticipated and actual claims experience, and
3) interest earned on investments over and above the rate required to maintain policy reserves. Having regard to the source of the surplus, the "dividend" so paid can be considered, in part at least, as a refund of part of the premium paid by the policy owner.
Life insurance policy owners of participating policies usually have four and sometimes five dividend options from which to choose:
1) take the dividend in cash,
2) apply the dividend to reduce current premiums,
3) leave the dividends on deposit with the insurance company to accumulate at interest like a savings plan,
4) use the dividends to purchase paid-up whole life insurance to mature at the same time as the original policy,
5) use the dividends to purchase one year term insurance equal to the guaranteed cash value at the end of the policy year, with any portion of the dividend not required for this purpose being applied under one of the other dividend options.
NOTE: It is suggested here that if you have a participating whole life policy and at the time of purchase received a "dividend projection" of incredible future savings, ask for a current projection. Life insurance company's surpluses are not what they used to be.



Dividend

Unlike dividends which are paid to company shareholders, participating insurance policy dividends are not based on the company's overall profits. Rather, they are determined by grouping policies by type and country of issue and looking at how each class contributes to the company's earnings and surplus.


Dividend clawback

With respect to a project financing, an arrangement under which the sponsors of a project
agree to contribute as equity any prior dividends received from the project to the extent necessary to cover
any cash deficiencies.


Dividend clientele

A group of shareholders who prefer that the firm follow a particular dividend policy. For
example, such a preference is often based on comparable tax situations.


dividend discount model

Computation of today’s stock price which states that share value equals the present value of all expected future dividends.


Dividend discount model (DDM)

A model for valuing the common stock of a company, based on the
present value of the expected cash flows.


Dividend growth model

A model wherein dividends are assumed to be at a constant rate in perpetuity.


Dividend income

Income that a company receives in the form of dividends on stock in other companies that it holds.


Dividend limitation

A bond covenant that restricts in some way the firm's ability to pay cash dividends.


Dividend payout ratio

Percentage of earnings paid out as dividends.


dividend payout ratio

Computed by dividing cash dividends for the year
by the net income for the year. It’s simply the percent of net income distributed
as cash dividends for the year.


dividend payout ratio

Percentage of earnings paid out as dividends.


Dividend policy

An established guide for the firm to determine the amount of money it will pay as dividends.


Dividend Policy

This policy governs Canada Life's actions regarding distribution of dividends to policyholders. It's goal is to achieve a dividend distribution that is equitable and timely, and which gives full recognition of the need to ensure the ongoing solidity of the company. It also specifies that distribution to individual policyholders must be equitable between dividend classes and policyholder generations, and among policyholders within any class.


Dividend rate

The fixed or floating rate paid on preferred stock based on par value.


Dividend reinvestment plan (DRP)

Automatic reinvestment of shareholder dividends in more shares of a
company's stock, often without commissions. Some plans provide for the purchase of additional shares at a
discount to market price. dividend reinvestment plans allow shareholders to accumulate stock over the Long
term using dollar cost averaging. The DRP is usually administered by the company without charges to the
holder.


Dividend rights

A shareholders' rights to receive per-share dividends identical to those other shareholders receive.


Dividend yield (Funds)

Indicated yield represents return on a share of a mutual fund held over the past 12
months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at current rates), but not
redemption charges.


dividend yield ratio

Cash dividends paid by a business over the most
recent 12 months (called the trailing 12 months) divided by the current
market price per share of the stock. This ratio is reported in the daily
stock trading tables in the Wall Street Journal and other major newspapers.


Dividend yield (Stocks)

Indicated yield represents annual dividends divided by current stock price.


Dividends

Amounts paid to the owners of a company that represent a share of the income of the company.


Dividends

Profits paid out to shareholders by a corporation.


Dividends per share

Amount of cash paid to shareholders expressed as dollars per share.


Dividends per share

dividends paid for the past 12 months divided by the number of common shares
outstanding, as reported by a company. The number of shares often is determined by a weighted average of
shares outstanding over the reporting term.


Equity Method

Accounting method for an equity security in cases where the investor has sufficient
voting interest to have significant influence over the operating and financial policies of an
investee.


Ex-dividend

This literally means "without dividend." The buyer of shares when they are quoted ex-dividend
is not entitled to receive a declared dividend.


Ex-dividend date

The first day of trading when the seller, rather than the buyer, of a stock will be entitled to
the most recently announced dividend payment. This date set by the NYSE (and generally followed on other
US exchanges) is currently two business days before the record date. A stock that has gone ex-dividend is
marked with an x in newspaper listings on that date.


ex-dividend date

Date that determines whether a stockholder is entitled to a dividend payment; anyone holding stock before this date is entitled to a dividend.


Extra or special dividends

A dividend that is paid in addition to a firm's "regular" quarterly dividend.


FIFO method (of process costing)

the method of cost assignment that computes an average cost per equivalent
unit of production for the current period; keeps beginning
inventory units and costs separate from current period production
and costs


First in, first-out costing method (FIFO)

A process costing methodology that assigns the earliest
cost of production and materials to those units being sold, while the latest costs
of production and materials are assigned to those units still retained in inventory.


First-In, First-Out (FIFO) Inventory Method

The inventory cost-flow assumption that
assigns the earliest inventory acquisition costs to cost of goods sold. The most recent inventory
acquisition costs are assumed to remain in ending inventory.


Flow-through method

The practice of reporting to shareholders using straight-line depreciation and
accelerated depreciation for tax purposes and "flowing through" the lower income taxes actually paid to the
financial statement prepared for shareholders.


Full-Cost Method

A method of accounting for petroleum exploration and development expenditures
that permits capitalization of all such expenditures, including those leading to productive
as well as nonproductive wells.


growth funds

Mutual funds that seek long-term capital growth. This type of fund invests primarily in equity securities.


Growth manager

A money manager who seeks to buy stocks that are typically selling at relatively high P/E
ratios due to high earnings growth, with the expectation of continued high or higher earnings growth.


Growth opportunity

Opportunity to invest in profitable projects.


Growth phase

A phase of development in which a company experiences rapid earnings growth as it produces
new products and expands market share.


growth rate

an estimate of the increase expected in dividends
(or in market value) per share of stock


Growth rates

Compound annual growth rate for the number of full fiscal years shown. If there is a negative
or zero value for the first or last year, the growth is NM (not meaningful).


Growth stock

Common stock of a company that has an opportunity to invest money and earn more than the
opportunity cost of capital.


high-low method

a technique used to determine the fixed
and variable portions of a mixed cost; it uses only the highest
and lowest levels of activity within the relevant range


Homemade dividend

Sale of some shares of stock to get cash that would be similar to receiving a cash dividend.


Indicated dividend

Total amount of dividends that would be paid on a share of stock over the next 12 months
if each dividend were the same amount as the most recent dividend. Usually represent by the letter "e" in
stock tables.


Indirect method

A method of preparing the operating section of the Statement of Cash Flows that does not use the company’s actual cash inflows and cash outflows, but instead arrives at the net cash flow by taking net income and adjusting it for noncash expenses and the changes from last year in the current assets and current liabilities.


Indirect-Method Format

A format for the operating section of the cash-flow statement that
presents the derivation of cash flow provided by operating activities. The format starts with net
income and adjusts for all nonoperating items and all noncash expenses and changes in working capital accounts.


information content of dividends

dividend increases send good news about cash flow and earnings. dividend cuts send bad news.


Internal growth rate

Maximum rate a firm can expand without outside source of funding. growth generated
by cash flows retained by company.


internal growth rate

Maximum rate of growth without external financing.


judgmental method (of risk adjustment)

an informal method of adjusting for risk that allows the decision maker
to use logic and reason to decide whether a project provides
an acceptable rate of return


Last-In, First-Out (LIFO) Inventory Method

The inventory cost-flow assumption that assigns the most recent inventory acquisition costs to cost of goods sold. The earliest inventory
acquisition costs are assumed to remain in ending inventory.


Liquidating dividend

Payment by a firm to its owners from capital rather than from earnings.


Log-linear least-squares method

A statistical technique for fitting a curve to a set of data points. One of the
variables is transformed by taking its logarithm, and then a straight line is fitted to the transformed set of data
points.


method of least squares

see least squares regression analysis


method of neglect

a method of treating spoiled units in the
equivalent units schedule as if those units did not occur;
it is used for continuous normal spoilage


MM dividend-irrelevance proposition

Theory that under ideal conditions, the value of the firm is unaffected by dividend policy.


modified FIFO method (of process costing)

the method of cost assignment that uses FIFO to compute a cost per
equivalent unit but, in transferring units from a department,
the costs of the beginning inventory units and the
units started and completed are combined and averaged


Monetary / non-monetary method

Under this translation method, monetary items (e.g. cash, accounts
payable and receivable, and long-term debt) are translated at the current rate while non-monetary items (e.g.
inventory, fixed assets, and long-term investments) are translated at historical rates.


Moving average inventory method

An inventory costing methodology that calls for the re-calculation of the average cost of all parts in stock after every purchase.
Therefore, the moving average is the cost of all units subsequent to the latest purchase,
divided by their total cost.


net present value method

a process that uses the discounted
cash flows of a project to determine whether the
rate of return on that project is equal to, higher than, or
lower than the desired rate of return


Net Present Value (NPV) Method

A method of ranking investment proposals. NPV is equal to the present value of the future returns, discounted at the marginal cost of capital, minus the present value of the cost of the investment.


Net present value of growth opportunities

A model valuing a firm in which net present value of new
investment opportunities is explicitly examined.


Normalizing method

The practice of making a charge in the income account equivalent to the tax savings
realized through the use of different depreciation methods for shareholder and income tax purposes, thus
washing out the benefits of the tax savings reported as final net income to shareholders.


Payback method

A capital budgeting analysis method that calculates the amount of
time it will take to recoup the investment in a capital asset, with no regard for the
time cost of money.


Percentage-of-Completion Method

A contract accounting method that recognizes contract
revenue and contract expenses as progress toward completion is made.


Perfect market view (of dividend policy)

Analysis of a decision on dividend policy, in a perfect capital
market environment, that shows the irrelevance of dividend policy in a perfect capital market.


Preferred Stock Stock that has a claim on assets and dividends of a corporation that are prior

to that of common stock. Preferred stock typically does not carry the right to vote.


Present value of growth opportunities (NPV)

Net present value of investments the firm is expected to make
in the future.


present value of growth opportunities (PVGO)

Net present value of a firm’s future investments.


Purchase method

Accounting for an acquisition using market value for the consolidation of the two entities'
net assets on the balance sheet. Generally, depreciation/amortization will increase for this method compared
with pooling and will result in lower net income.


Purchase method

An accounting method used to combine the financial statements of
companies. This involves recording the acquired assets at fair market value, and the
excess of the purchase price over this value as goodwill, which will be amortized
over time.


Residual dividend approach

An approach that suggests that a firm pay dividends if and only if acceptable
investment opportunities for those funds are currently unavailable.



 

 

 

 

 

 

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