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.
An examination of the three variants of a stable dividend policy require addressing the questions. What is their relative suitability? What are their implications to the share hold firm? Which form would find favour with the investors?
The target payout ratio, as a form of stable dividend policy, commends itself insofar as it relates of actual dividend and to the ability of the firm to pay dividends the higher then the higher is the dividend per share to the investors. It also implies that funds are sloughed back to the extent of the retained earnings. It also guards against overpay on as underpayment of dividends because management cannot pay dividends if there us and it cannot withhold them when profits are earned. But from the shareholder’s this method involves uncertainty and irregularity in regard to the expected dividends of paying sporadic dividends may not find favour with them.
What the investors expect is that they should get an assured fixed amount as dividends which and consistently increase over the years. The most commendable form of stable is the constant dividend per share policy. There are several reasons why investors a stable dividend policy and pay a higher price for a firm’s shares which observes dividend payments.