consists mostly of individuals, Institutions and then a relatively small number of company employees. Individual shareholders account for about 50% of shares owned by all investors. The Institutions come next with a total of 36.9% of total shares, this consist of Pension Funds, Mutual funds, Financial Institutions and Insurance Companies.Finally there is about 11% of shares owned under the ESOP, this is a program designed to encourage employees to purchase stock in the company. It is used as a retirement savings vehicle.There is a view of dividend policy that starts with the notion that the actions of companies reflect the preferences of their investors, hence shareholders. The clientele model shows that those who pay the lowest level of income tax should own shares with higher dividend yields vice-versa. This is because high dividends would not result in high taxes for these investors as some don't pay tax e.g. pension funds. The conclusion from this is that the pensioners have no tax reason to prefer stock repurchases to dividends. In fact they might actually prefer dividends due to transaction cost. Another reason they may be worse off without dividends occurs when the pensioner lives off this income payments. Technically one can manufacture their own dividend by selling off some shares, but this would incur a transaction cost.Another group that would be indifferent about dividends are financial institutions, these firms operate free of all taxes, both income and capital gains tax, so have no tax reason to prefer either. Corporations would prefer dividends for tax reasons since they pay corporate income tax on only a percentage of dividends received. In contrast they would have to pay tax on the full amount of any realised capital gains.The company would not want to cut dividends if it wanted to appeal to the pensioners, corporations and other institutions that require a high payout (20% of total shares). The other 51% are individua...
