Today is discussing how to understand the distribution policy of a company. It is called phd policy in English, and we can also call it dividends. I am quite familiar with this field. Let’s first look at this type. Our distribution policy is actually divided into three categories:
. What we are most familiar with is called cash dividends.
cash dividend means how much cash dividend the company gives to each shareholder each share. Then this method is the simplest. It does not change the proportion of the company's original main control, and then the company will have a large amount of cash outflow. If shareholders receive this income, it is normal to pay income tax.
Second type: Stock repurchase
The second type we call stock repurchase, and stock repurchase is a very important direction as a distribution policy.
However, in the past, there were very few stock repurchases in our Chinese market, which was related to the provisions of our previous Company Law in China. In the past, our Chinese Company Law stipulated that the stocks you repurchase basically required a period of time and required cancellation, because cancellation involves capital reduction, and capital reduction is a very, very troublesome thing.
Company reduction is a very troublesome thing.
Therefore, most listed companies are unwilling to conduct stock repurchases. Recently, our country has revised the Company Law, and the regulatory level has introduced relevant policies to encourage stock repurchases, so this stock repurchase is much more popular than before. So why is stock repurchase considered to be a distribution method? This is because it also involves the outflow of cash from the company. For example, if a company announces that when the stock price is not higher than ten yuan, I will be planning to spend up to one billion to repurchase the stock. If you repurchase all of the billion yuan, the listed company will take it out. After taking out the money, the money will be given to a part of the shareholder. Then that part of the shareholder returns his stock to the listed company, and the listed company can place the stock on the treasury stocks.
If the treasury stock is cancelled. In other words, our earnings per share actually increased.
So in this sense, they actually have something in common between stock repurchase and cash dividends, that is, it increases the outflow of cash and reduces the cash that can be left to the company. It actually does not change the control structure of the major shareholders. That is to say, some small shareholders give up the stock. After giving up, the number of shares held by the major shareholders remains unchanged. If you cancel this part of the stock, the shareholding ratio of the major shareholders will increase, but in their original control structure, all these major shareholders will rise in equal proportion.
In this case it changes the percentage, but it does not change the relative size.
Stock dividend
Then the last one is what we often call stock dividends.
Stock dividends are essentially similar to stock splits, but stock dividends are slightly different in terms of accounting treatment. If there is still money in the capital reserve, then this is called converting stocks. Then this converting stocks does not belong to stock dividends, but if you convert undistributed profits into equity capital, then this is stock dividends.
Because dividends are defined as dividends that are distributed to shareholders by your company's profits, which is the nature of dividends. So why did we talk about dividends before, and call it this kind of distribution? PHD policy is the distribution policy, which means that you are the money you make from the company and you take it out to share it for shareholders. This is called the distribution policy.
So your stock dividend is also a distribution policy, because your company has never distributed profits and converts this profit into equity. If you take out this undistributed profit and send it to me in cash, then this is cash dividend.We know that if it is a stock dividend, it will not change the percentage of the existing equity, but it will change the structure of the equity, that is, part of your original shareholders' equity is the undistributed profit, and part of your total equity is the capital, so your total equity has increased, but the total amount of your shareholders' equity remains unchanged, and the structure has changed.
Then the second thing is that there is no cash outflow for stock dividends. It turns out that one share becomes two shares, so the cash flow right has not changed to the original shareholders. Although you seem to have too many stocks in your hand, it is a illusion, because you have lowered the cash flow right of each share of your corresponding company, although your stock has doubled.
For example, if you get ten for ten, your company's profitability of 5 billion yuan has not changed, the total assets have not changed, and the cash flow has not changed, but your total number of shares has doubled, which means that the corresponding cash flow for each share has been doubled.
So from the perspective of the person you hold, your original holdings were, for example, 10,000 shares, and now you have become 20,000 shares, but the corresponding cash flow for each share has doubled, so in the end, the proportion of the corresponding total cash flow rights in your hands has not changed. For example, a company has a total of 100 million shares, and you hold one percent, that is, one million shares. Now this company has gotten one ten get ten free. If you get ten ten, that is, you have become two hundred million shares. You used to have one million shares, but now you have become two million shares, but the company is still the same company's entire cash flow and profitability have not changed. It seems that your number of shares has doubled and it has become two million shares, but the percentage you hold in this company is still one percent. That's why? This stock dividend is essentially one of the reasons why it does not create value, but instead you have to pay taxes when you make the distribution.
So in theory, the economic meaning of stock dividends is not particularly obvious.
So in theory, the economic meaning of stock dividends is not particularly obvious
However, some people say that stock dividends convey information about the better development of the company. So I actually think this place is controversial, and we will discuss it later. Then stock splitting means stock splitting, which means that one stock you have turned into two stocks. For example, the face value of my stock is one yuan, then I have a total of 100 million shares, and then I will split it into two hundred million shares, which means that my stock becomes 50 cents.
We just discussed different ways of encouraging, only three types of dividends. Then let’s take a look at the position of this dividend in the entire company’s business process. We can see that first of all, from the perspective of a listed company, the company obtains capital of equity from shareholders and then uses this capital to take liabilities, and invests this funds in projects and invests them into assets. The assets are the profits generated. After the company obtains this profit, it will make a decision. The company decides to leave the profits in the company for reinvestment, or use this money to return the shareholders.
Profit distribution
Then if the company decides to use part of the funds to distribute dividends to shareholders at this time, this will give a certain return to the shareholders' investment. So from this perspective, from the perspective of shareholders, the part of the cash he gets is actually dividends, unless he sells the stock. But from the perspective of all shareholders, if you sell the stock, you do not get money from listed companies, but from other shareholders. So from the perspective of all shareholders, the returns obtained by all shareholders are actually dividends. So we can say from the perspective of a company, how many shareholders have you given back? In fact, we need to look at it from the perspective of encouragement.
