Bird-in-the-hand Theory

Bird-in-the-hand Theory

	investors' response	cost of equity	equity value
assurance of receiving a higher dividend today	positive	lower	higher
waiting for returns in the form of capital appreciation	negative
stock repurchase	(*) does not provide the same assurance as dividends
unstable dividends	(apart from the theory, generally) negative

(*) It is an unpredictable and possibly one-time event.