Bird In Hand

Dictionary Says

Definition of 'Bird In Hand'

A theory that postulates that investors prefer dividends from a stock to potential capital gains because of the inherent uncertainty of the latter. Based on the adage that a bird in the hand is worth two in the bush, the bird-in-hand theory states that investors prefer the certainty of dividend payments to the possibility of substantially higher future capital gains.  

Investopedia Says

Investopedia explains 'Bird In Hand'

The theory was developed by Myron Gordon and John Lintner as a counterpoint to the Modigliani-Miller dividend irrelevance theory, which maintains that investors are indifferent to whether their returns from holding a stock arise from dividends or capital gains. Under the bird-in-hand theory, stocks with high dividend payouts are sought by investors and consequently command a higher market price.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Dividend

    1. A ...
  2. Payout Ratio

    The amount of ...
  3. Dividend Yield

    A financial ...
  4. Ex-Date

    The date on or ...
  5. Qualified Dividend

    A type of ...
  6. Modigliani-Miller Theorem - M&M

    A financial ...
  7. Franco Modigliani

    An ...
  8. Merton Miller

    A prominent ...
  9. Current Dividend Preference

    A safety feature ...
  10. Boom

    A period of time ...

Articles Of Interest

  1. Why Dividends Matter

    Seven words that are music to investors' ears? "The dividend check is in the mail."
  2. How And Why Do Companies Pay Dividends?

    Explore arguments for and against company dividend policy, and learn how companies determine how much to pay out.
  3. How Dividends Work For Investors

    Find out how a company can put its profits directly into your hands.
  4. Dissecting Declarations, Ex-Dividends And Record Dates

    Understanding the dates of the dividend payout process can be tricky. We clear up the confusion.
  5. Evaluating Retained Earnings: What Gets Kept Counts

    A company's retained earnings matter. Be investment-savvy and learn how to analyze this often overlooked information.
  6. Should You Invest Your Entire Portfolio In Stocks?

    It is true that stocks outperform bonds and cash in the long run, but that statistic doesn't tell the whole story.
  7. The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.
  8. Risk Tolerance Only Tells Half The Story

    Just because you're willing to accept a risk, doesn't mean you always should.
  9. 5 Tips For Diversifying Your Portfolio

    A diversified portfolio will protect you in a tough market. Get some solid tips here!
  10. Invest Like A Pro

    By following the strategies of the pros, even a beginner can learn to invest like an expert.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center