Phil Grange, the CEO of Haveloche Corporation, have been asked to be a guest lecturer at Cokesbury College. One of the finance professors has specifically requested a discussion on Haveloche's dividend policy, hi preparation, Phil has reviewed several textbooks that Dr. Roche, the professor, has provided, and has printed out the history of dividends for the nine years that Haveloche Corporation has been publicly traded.
Haveloche Corporation was formed in 1989 as a research firm dedicated to innovative electronic design. Haveloche sells patents to large electronics manufacturing companies. For innovative inventions that are immediately useful ...view middle of the document...
PAST DIVIDEND PRACTICES
Haveloche's fiscal year ends in June each year, at which point the firm pays dividends, if any. From the initial public offering of stock until 2000, Haveloche pursed a dividend policy of paying out 20% of earnings in cash dividends, hi January 2000, Phil Grange took over the CEO position at haveloche and bagan to vary the dividend based on the firm's need for cash reinvestment. If the firm had need of equity funding, the cash dividends were lowered, which was usually the case. A few times, dividends were relatively high, since an immediate capital need was not present.
Phil had reviewed materials that Professor Roche had given him, and had refreshed his memory on several theories of dividend policy. The concepts seemed to be inconclusive at best and the textbooks seemed to ramble through opinions from a variety of perspectives. The ideal dividend policy was not identified, though. Phil was unsure of how to even approach his talk, considering the text books couldn't even seem to draw a conclusion. He decided to just present Haveloche's history along with the stock price over time and answer any questions that arose during the class period.
Phil decided to just learn as much as he could about the different hypotheses concerning dividend policy, so that he could easily refer to them in his responses to...