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Hi John,
hope you are well.
I am confused about the (supposed) benefit of script dividends (lecture for chp. 4). if the company issues more shares, wont the EPS fall and so have a signal effect? are we only supposed to take current shareholders into account?
If shareholders take new shares instead of dividend, then although there will obviously be more shares in issue, the company will be retaining more cash which will mean they can invest more and increase earnings.
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