Create homemade dividends

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What did Helen Bedford mean when she said, "those shareholders who don't like our dividend policy can create 'homemade dividends'"? How can one make homemade dividends? Assume for the purpose of illustration that there are no taxes and that you are a shareholder who owns 1,000 shares, each worth $8, and are expecting the company to pay a dividend of $1.00 per share. What would be your wealth if your expectations turned out to be right? Next, suppose that the company decides to retain all its earnings. Then how can you create homemade dividends, and what would your wealth be as a result?

Reference no: EM132395436

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