2021 CFA Level II Exam: Study Session 7. Corporate Finance (1) - Reading 21. Analysis of Dividends and Share Repurchases

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	1. Dividend policy and company value: theory a. compare theories of dividend policy and explain implications of each for share value given a description of a corporate dividend action; b. describe types of information (signals) that dividend initiations, increases, decreases, and omissions may convey; c. explain how clientele effects and agency issues may affect a company's payout policy;
	2. Factors affecting dividend policy d. explain factors that affect dividend policy; e. calculate and interpret the effective tax rate on a given currency unit of corporate earnings under double taxation, dividend imputation, and split-rate tax systems;
	3. Payout policies f. compare stable dividend, constant dividend payout ratio, and residual dividend payout policies, and calculate the dividend under each policy; g. explain the choice between paying cash dividends and repurchasing shares; h. describe broad trends in corporate dividend policies;
	4. Analysis of dividend safety i. calculate and interpret dividend coverage ratios based on 1) net income and 2) free cash flow; j. identify characteristics of companies that may not be able to sustain their cash dividend.

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