Dividend Irrelevance Theory

What is the 'Dividend Irrelevance Theory'

The dividend irrelevance theory is a theory that investors are not concerned with a company's dividend policy since they can sell a portion of their portfolio of equities if they want cash.

BREAKING DOWN 'Dividend Irrelevance Theory'

The dividend irrelevance theory essentially indicates that an issuance of dividends should have little to no impact on stock price.

RELATED TERMS
  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Dividend Policy

    The policy a company uses to decide how much it will pay out ...
  3. Dividend Signaling

    A theory that suggests company announcements of an increase in ...
  4. Forward Dividend Yield

    An estimation of a year's dividend expressed as a percentage ...
  5. Dividend Rate

    The total expected dividend payments from an investment, fund ...
  6. Irrelevant Cost

    A managerial accounting term that represents a cost, either positive ...
Related Articles
  1. Investing

    Why Dividends Matter

    Seven words that are music to investors' ears? "The dividend check is in the mail."
  2. Investing

    How And Why Do Companies Pay Dividends?

    The arguments for dividends include the idea that a dividend provides certainty about a company’s well being.
  3. Investing

    How And Why Do Companies Pay Dividends?

    If a company decides to pay dividends, it will choose one of three approaches: residual, stability or hybrid policies. Which a company chooses can determine how profitable its dividend payments ...
  4. Investing

    The 3 Biggest Misconceptions of Dividend Stocks

    To find the best dividend stocks, focus on total return, not yield.
  5. Investing

    How Dividends Work For Investors

    Find out how a company can put its profits directly into your hands.
  6. Investing

    6 Common Misconceptions About Dividends

    You've almost certainly heard these commonly held beliefs about dividends. Find out why they're wrong.
  7. Markets

    How Dividends Affect Stock Prices

    Find out how dividends affect the price of the underlying stock, the role of market psychology and how to predict price changes after dividend declaration.
  8. Trading

    7 Controversial Investing Theories

    We take a closer look at the theories that attempt to explain and influence the market.
  9. Investing

    Due Diligence On Dividends

    Understanding dividends and how they work will help you become a more informed and successful investor.
  10. Managing Wealth

    The Importance of Dividends in Your Portfolio

    Learn some of the primary reasons why dividends constitute a critical factor in the overall performance of a stock investor's portfolio.
RELATED FAQS
  1. Which of the following statements is least accurate with respect to the various ...

    The correct answer is: b) The tax preference theory simply argues that capital gain return results in a higher after tax ... Read Answer >>
  2. Which is better a cash dividend or a stock dividend?

    The purpose of dividends is to return wealth back to the shareholders of a company. There are two main types of dividends: ... Read Answer >>
  3. What is the difference between yield and dividend?

    Learn how to differentiate between dividend yield and dividend return, and see why dividend yield is the more popular rate ... Read Answer >>
  4. Can dividends be paid out monthly?

    Find out if stocks can pay dividends monthly, and learn about the types of companies most likely to do so and how monthly ... Read Answer >>
  5. What types of companies offer the most dividends?

    Find out which types of companies tend to offer the most dividends, and learn why dividends must be considered carefully ... Read Answer >>
  6. If I reinvest my dividends, are they still taxable?

    Take a brief look at how the Internal Revenue Service taxes different kinds of dividends, including taxation on dividends ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center