Bird-in-the-hand theory
Bird-in-the-hand theory is the theory that assumes that investors value a dollar of dividends more highly than a dollar of expected capital gains, because a certain dividend is less risky than a possible capital gain. This theory implies that a high-dividend stock has a higher price and lower required return, all else held equal.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Bird-in-the-hand theory. Assumes that investors value a dollar of dividends more highly than a dollar of expected capital gains, because a certain dividend is less risky than a possible capital gain. This theory implies that a high-dividend stock has a higher price and lower required return, all else held equal.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
