The “tit in hand” theory says that investors prefer stock dividends over potential capital gains due to the uncertainty of capital gains.
The theory was developed as a counterpoint to Modigliani-Miller’s dividend irrelevance theory, which claims that investors don’t care where their returns come from.
Capital gains investment represents the “two in the bush” side of the proverb “a tit in the hand is worth two in the bush”.
Convertible preferred shares are a type of preferred shares that pay dividends and can be converted into ordinary shares at a fixed conversion rate after a certain period of time.
The dividend rate, expressed as a percentage or yield, is a financial ratio showing how much a company pays dividends annually in relation to its share price.
Dividend recapitalization is when a private equity firm issues new debt to raise money to pay special dividends to investors who helped finance the original purchase of the portfolio company.
Dividend yield, displayed as a percentage, is the amount of money a company pays shareholders for holding shares divided by the current price of its shares.
A Dividend Received Deduction (DRD) applies to certain corporations that receive dividends from related entities and mitigates potential triple taxation effects.
Forward dividend yield is the percentage of a company’s current share price that the company expects to pay out in dividends over a specified period of time, usually 12 months.