Residual Dividend

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Definition of 'Residual Dividend'

The term residual dividend refers to a method of calculating dividends. A dividend is a payment made by a company to its shareholders. It is essentially a portion of the company's profits that is divided amongst the people who own stock in the company. A residual dividend policy is one where a company uses residual or leftover equity to fund dividend payments. Typically, this method of dividend payment creates volatility in the dividend payments that may be undesirable for some investors.
Investopedia Says

Investopedia explains 'Residual Dividend'

Companies that use the residual dividend policy first use the cash flow to fullfill necessary capital expenditures and the remaining amount available (the residual) is paid out to shareholders. Also, if the company is maintaining a certain target debt to equity capital structure, then the full amount of the capital expenditure will not be paid entirely by equity but also with part debt.
Search results for

'Residual Dividend'

  • How And Why Do Companies Pay Dividends?

    http://www.investopedia.com/articles/03/011703.asp
    ... Residual Companies using the residual dividend policy choose to rely on
    internally generated equity to finance any new projects. ...

  • CFA Level 1 Study Guide - Corporate Finance - Setting Dividends ...

    http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/setting-dividends.asp
    Explains how the residual-dividend model can help set a target dividend payout
    ratio. Compares the advantages and disadvantages of the model. ...

  • Valuing A Company Using The Residual Income Method

    http://www.investopedia.com/articles/fundamental-analysis/11/residual-income-model.asp
    ... residual income valuation formula is very similar to a multistage dividend discount
    model, substituting future dividend payments for future residual earnings. ...

  • How To Choose The Best Stock Valuation Method

    http://www.investopedia.com/articles/fundamental-analysis/11/choosing-valuation-methods.asp
    ... Valuation models that fall into this category include the dividend discount model,
    discounted cash flow model, residual income models and asset-based models. ...

  • The Equity-Risk Premium: More Risk For Higher Returns

    http://www.investopedia.com/articles/04/012104.asp
    ... have a prior claim while common stock holders have a residual claim. ... Dividend-Based
    Approach The two leading supply-side approaches start with either dividends ...

  • CFA Level 1 Study Guide - Financial Ratios - Growth Potential ...

    http://www.investopedia.com/exam-guide/cfa-level-1/financial-ratios/growth-potential-ratios.asp
    ... Decisions; 11.29 Degree of Total Leverage; 11.30 Dividend Theories; 11.31 Dividend
    Growth Rate and the Effect of Changing Dividend Policy; ...

  • How To Assess A Real Estate Investment Trust (REIT)

    http://www.investopedia.com/articles/04/112204.asp
    ... are not recurring and therefore do not contribute to the sustainable dividend-paying
    capacity ... must be painted), so FFO is not quite the true residual cash flow ...

  • How Interest Rates Affect Property Values

    http://www.investopedia.com/articles/mortgages-real-estate/08/interest-rates-affect-property-values.asp
    ... properties don't usually retain cash or have a stated dividend policy, NCF ... dividends
    or by discounting the cash flow stream (including any residual value) for ...

  • CFA Level 1 Study Guide - Quantitative Methods - Regression ...

    http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/regression-analysis.asp
    ... Decisions; 11.29 Degree of Total Leverage; 11.30 Dividend Theories; 11.31 Dividend
    Growth Rate and the Effect of Changing Dividend Policy; ...

  • Stock-Picking Strategies: Fundamental Analysis | Investopedia

    http://www.investopedia.com/university/stockpicking/stockpicking1.asp
    ... PV of residual value - The present value of the firm in year five. ... The only natural
    cash flow from a public company to its shareholders is a dividend, and the ...

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