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Dividend Limitation
(redirected from Dividend Limitations)

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Dividend limitation
A bond convenant that restricts in some way the firm's ability to pay cash dividends.

Dividend Limitation
A provision in some bond indentures placing a maximum amount on what a company can pay out in dividends. A dividend limitation reduces the risk that the issuer will default on a bond because it foolishly decides to pay out too much in dividends to common shareholders. This provision is designed to protect bondholders but has the possibility to scare away potential stockholders.


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Specifically, any declaration of future cash dividends will depend upon a number of factors, including the Bank's future earnings, financial condition, cash needs, general business conditions and dividend limitations imposed by law.
Customary covenants apply to the term loan, including maximum total leverage, interest coverage, capital expenditure limits, stock repurchase and dividend limitations and standard restrictions on investments and mergers and acquisitions.
Somewhat constraining the parent company's financial flexibility are operating company dividend limitations in Wisconsin, which are more restrictive than in other states.
 
 
 
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