Would a dividend recap affect P/E multiple?
I am wondering if the P/E multiple of a public company would be affected somehow by a dividend recap. Thanks in advance.
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Assume we’re looking at forward P/E with a special dividend from a recap coming
Dividends are below the [net income] line, so they don’t directly impact the denominator (earnings). The added debt service payments reduce net income however.
Price is complicated - upon announcement stock would trade up by roughly the PV of special dividend, I think? Offset by any incremental risk from bankruptcy if over-leveraged
I think P/E would increase but interested to hear other opinions too
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