How to model ex-dividend stock for DCF???
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To be precise, the stock should fall the day after the ex date, not the date the dividend is paid.
^ I understand that. But in terms of modeling, shoud I take away $.50/share * 20 million shares = $10 million on the balance sheet since they paid out the special dividend?????
Can you think of a good reason not to deduct cash you know the company does not have???
So if the company had $30 million cash on the balance sheet in July 2015, and they paid the special dividend this month ($.50/share * 40 million shares), would they now have $30 million - ($.50/share * 40 million shares) = $10 million cash left and I should use $10 million now on my DCF?
Sure, why not. Not sure if .50 makes a difference in valuation but go ahead.
Dividends wouldn't play into Unlevered FCF (NOPAT+D&A-capex-change in NWC), however if you are doing a project finance style cash flow waterfall (CFADS->> CF available for equity etc) you would want to show the dividend being paid out of CF available to equity to get to Residual cash flows (IE your cash flow available for debt service would be before the dividend, so looking at it as a pref or construction financing investor, I don't care if you pay dividends because the equity holders are below me in priority so I would be looking at CFADs). In terms of where this would hit your BS if you are doing a 3 statement, it would be in the cash line of current assets (as a subtraction to show the cash leaving) and in retained earnings portion of Stockholders Equity (RE ending = RE begin + net income -dividends paid during period) and it would also hit the cash flow statement as a cash outflow in CF from financing (since dividends aren't captured in NI, need to be subtracted here).
Hope this isn't too confusing, the short answer is it depends from whose perspective you are looking at CFs and for what purpose.
Why do you have to complicate such a simple question?
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