The expected dividend payout is influenced by many factors such as after tax earnings, availability of cash, shareholders expectation, expected future earnings, liquidity, leverage, return on investment, industry norms as well as future earnings.
What are dividends What are the types of dividends and factors affecting the dividend policy?
Factors Affecting Dividend Policy
Past Dividend Rates: There should be a steady rate of return on dividends to maintain stability; therefore previous year’s allowed return is given due consideration. … Some shareholders consider dividends as a regular income, while the others seek for capital gain or value appraisal.
What is dividend policy throw light on the factors affecting dividend policy?
The financial matters like trend of profit, existence of earned surplus, cash position, reaction of shareholders, economic policy of the nation, need for expansion, and nature of the enterprise trade cycle, age of the company, government taxation policy are determinants of dividend policy.
What are the types of dividend policy?
There are three types of dividend policies—a stable dividend policy, a constant dividend policy, and a residual dividend policy.
What are the factors affecting dividend?
The following are some of the important factors, which influence dividend policy of a concern:
- Stability of Earnings: …
- Financial Policy of the Company: …
- Liquidity of Funds: …
- Ability to Borrow: …
- Growth Needs of the Company: …
- Profit Rate: …
- Legal Requirements: …
- Policy of Control:
What are the objectives of dividend policy?
The most important objective of dividend policy is the improvement of the financial health of the company. This objective also takes into consideration shareholder’s wealth as the shareholder of the company plays a very important role in the company’s growth.
What are the three theories of dividend policy?
However, they are under no obligation to repay shareholders using dividends. Stable, constant, and residual are the three types of dividend policy. Even though investors know companies are not required to pay dividends, many consider it a bellwether of that specific company’s financial health.
What is dividend policy and explain its objectives?
Dividend policy is the policy used by a company to decide how much it will pay-out to shareholders in the form of dividends. Usually a company retains a part of its earnings and distributes the other part as dividend.
What is optimal dividend policy?
The optimal dividend policy is derived under general conditions which allow variable risk parameters and discounting. … For models with barriers for dividends the higher moments of the sum of the discounted dividend payments are derived.
What is strict dividend policy?
A residual dividend policy means companies use earnings to pay for capital expenditures first, with dividends paid with any remaining earnings generated.
What factors have to be considered by a company before giving a dividend?
Top 10 Factors for Consideration of Dividend Policy
- Factor # 1. General State of Economy:
- Factor # 2. Capital Market Considerations:
- Factor # 3. Legal, Contractual Constraints and Restrictions:
- Factor # 4. Tax Policy/Tax Consideration:
- Factor # 5. Inflation:
- Factor # 6. Stability of Dividends:
- Factor # 7. …
- Factor # 8.