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Hi, I have a few questions relating to Dividend Policy:
1) Does the share price increase or remain constant after a share repurchase?
2) Will a share repurchse cause the gearing to increase?
3) What is the impact on share price and gearing after a Scrip dividend?Many thanks for your help.
Hi,
Theoretically the share price should remain the same as there is no change in value of equity through the payment of cash. In reality though the share price is likely to increase as there are fewer shares on the market.
If we are measuring gearing on the book value then there would be a change as the equity is being reduced.
A scrip dividend is similar to a bonus issue of shares, but is there to replace the payment of the cash dividend. The share price will depend on the number of shares issued as dependent on this the price can change. Here, though the gearing based on book value will not change as we will just be adjusting share capital and share premium for the issue of the free shares.
Thanks
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