(i) Earning: The dividend is paid out of the present and reserved profits. Therefore, greater amount of total profit will ensure greater dividend. (ii) Stability of Earnings: A company having stable earnings is in a position to declare more dividends and vice-versa.
What is meant by dividend decision explain any four factors which affect the dividend decision of a company?
Stability of Earnings: Companies having stable or smooth earnings prefer to give high rate of dividend whereas companies with unstable earnings prefer to give low rate of earnings. 3. Cash Flow Position: Paying dividend means outflow of cash.
What is meant by dividend State the factors that affect dividend decision?
Factors affecting the dividend decision: Amount of Earnings: Amount of dividend paid by a company depends on the company’s current and past earnings. A company with high earning is in a better position to pay dividends and vice versa. … Cash flow position: Payment of dividends implies a cash outflow from the company.
What is meant by dividend decision?
The financial decision relates to the disbursement of profits back to investors who supplied capital to the firm. The term dividend refers to that part of profits of a company which is distributed by it among its shareholders.
What do you mean by dividend decision and also explain its Factors Affecting?
Dividend payout is also affected by firm’s liquidity position. In spite of sufficient retained earnings, the firm may not be able to pay cash dividend if the earnings are not held in cash.
What are the types of dividend decision?
Management must decide on the dividend amount, timing, and various other factors that influence dividend payments. There are three types of dividend policies—a stable dividend policy, a constant dividend policy, and a residual dividend policy.
Which of the following affects the dividend Decisionof a company?
Dividends are paid out of current and past earnings. Thus, earnings is a major determinant of dividend decision. A company having higher and stable earnings can declare higher dividends than a company with lower and unstable earnings. Generally, companies try to stabilise dividends per share.
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.
Which company is in a position to declare high dividend?
A company having stable earnings can declare high dividends.
How does cash flow position affect dividend decision?
(iii) Cash Flow Position: The payment of dividend involves outflow of cash. Hence if the company is facing shortage of cash, they will pay less dividend. Hence cash flow position affects dividend payment.
What is dividend decision give an example?
A decision suitable for one company may prove fatal for another company. For example, businesses with a consistent order book such as telecom and banking are expected to pay regular dividends. It may impact the stock prices if they do not pay dividends regularly. … Walter’s Theory on Dividend Policy.
What is dividend decision with example?
Under the stable dividend policy, the percentage of profits paid out as dividends is fixed. For example, if a company sets the payout rate at 6%, it is the percentage of profits that will be paid out regardless of the amount of profits earned for the financial year.
What is dividend with example?
For example, if a company pays a $1 dividend, the shareholder will receive $0.25 per share four times a year. Some companies pay dividends annually. A company might distribute a property dividend to shareholders instead of cash or stock. Property dividends can be any item with tangible value.
What are the two types of dividends?
- Cash Dividend: Cash dividend is the most popular form of dividend payout. …
- Stock dividend: If any company issues additional shares to common shareholders without any consideration then the action becomes stock dividend. …
- Property dividend: …
- Scrip dividend : …
- Liquidating dividend: