Category Archives: DETERMINANTS OF DIVIDEND POLICY

Desire for Current Income

Desire for Current Income A factor favoring a stable policy is the desire for current income by investors such as retired persons and widows, for example view dividends as a to meet their current living expenses. Such expenses are fairly constant from . Therefore, a fall in dividend will necessitate selling shares to obtain funds to expenses and, conversely, reinvestment of some of the dividend income if divide

Stable Rupee Dividend Plus Extra Dividend

Stable Rupee Dividend Plus Extra Dividend Under this policy, a firm usually pays a fixed to the shareholders and in years of marked prosperity, additional or extra dividend and above the regular dividend. As soon as normal conditions return, the firm cuts the end and pays the normal dividend per share. Evaluation An examination of the three variants of a stable dividend policy require addressing the questions.

Constant Payout Ratio

Constant Payout Ratio With constant payout ratio, a firm pays a constant percentage of net as dividend to the shareholders. In other words, a stable dividend payout ratio implies percentage of earnings paid out each year is fixed. Accordingly, dividends would fluctuate with earnings and are likely to be highly volatile in the wake of wide fluctuations earnings of the company. As a result, when the earnings of a

Constant Dividend Per Share

Constant Dividend Per Share According to this form of stable dividend policy, a company follows a policy of paying as certain fixed amount per share as dividend. For instance, on a face value of Rs 100, a firm may pay a fixed amount of, say Rs 15 as dividend. This amount would be paid year after year, irrespective of the level of earnings. In other words, fluctuations earnings would not affect the dividend paymen

Stability of Dividends

Stability of Dividends The second major aspect of the dividend policy of a firm is the stability of dividends. The invest favor a stable dividend as much as they favour the payment of dividends (D/P ratio). The term dividend stability refers to the consistency or lack of variability in the stream dividends. In more precise terms it means that a certain minimum amount of dividend is paid regularly. The stability o

FACTORS

FACTORS The factors determining the dividend policy of a firm may, for purpose of exposition, be classified into: (a) Dividend payout (D/P) ratio, (b) Stability of dividends, (c) Legal, contractual and internal constraints and restrictions, (d) Owner’s considerations, (e) Capital market considerations, and (f) Inflation. Dividend Payout (DP) Ratio A major aspect of the dividend policy of a firm is it divid

DETERMINANTS OF DIVIDEND POLICY

DETERMINANTS OF DIVIDEND POLICY INTRODUCTION The previous Chapter has provided an overview of the relationship between the dividend decision of a firm and it total value. In the light of the conflicting and contradictory viewpoints as also the available empirical evidence, there appears to be a case for the proposition that dividend decisions are relevant in the sense that investors prefer them over retained ea