Bird-in-hand theory vs tax-preference theory

[sn8eye]

All else unchanged, bird-in-hand theory says stock price goes up when company has high payout ratio.
On the other hand, tax-preference theory says stock price goes up when company has low payout ratio.

Correct? Can someone please confirm?

 

[satyaa]

You are correct. In case of Bird in hand theory people prefer current dividends to capital gains whereas in case of Tax preference theory becasue of the high tax bracket of the investors they prefer lower dividend payout.

Hope this helps.

 

[sleeplessingapore]

I thought Tax preference could mean preference either ways not just low dividend payouts. In some countries there are some govt trusts where the dividends on the underlying stocks are tax free. So at least in those situations a higher dividend payout may be preferable as the dividends are not taxable,

 

[satyaa]

I am not aware about the tax codes in different countries. If that is the case in other countries then you are correct.