(Mercer Capital) has been writing a series of articles designed to provide a complete analysis of the historical restricted stock studies many business appraisers rely on for estimating a discount for lack of marketability (DLOM). Mercer’s latest article addresses an issue that is “rarely mentioned in the context of the studies—the impact of dividends on restricted stock discounts (RSDs).” He concludes that an analyst cannot use restricted stock studies to estimate a DLOM for a dividend-paying company. “Some level of dividends in an investment would mitigate the marketability discount for otherwise similar investments with no dividends,” he writes. “The expectation of larger future dividends relative to smaller future dividends would mitigate the marketability discount for the higher dividend-paying investment. This is just common sense.” To read his full article, click here
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