Dividend

Types of Dividend Policy:

• Stable Dividend Policy

• Fluctuating Dividend Policy

• Small Constant Dividend per Share plus Extra Dividend.

Forms of Dividend

Cash Dividend

 Cash dividends (most common) are those paid out in the form of a cheque. Such dividends are a form of investment income and are usually taxable to the recipient in the year they are paid.

 This is the most common method of sharing corporate profits with the shareholders of the company. For each share owned, a declared amount of money is distributed. Thus, if a person owns 100 shares and the cash dividend is $0.50 per share, the person will be issued a cheque for 50 dollars.

Stock Dividend



Stock or scrip dividends are those paid out in form of additional stock

shares of the issuing corporation, or other corporation (such as its

subsidiary corporation).

They are usually issued in proportion to shares

owned (for example, for every 100 shares of stock owned, 5% stock

dividend will yield 5 extra shares). If this payment involves the issue of

new shares, this is very similar to a stock split in that it increases the total

number of shares while lowering the price of each share and does not

change the market capitalization or the total value of the shares held.

DIVIDEND POLICY

* Some facts about dividend policy

- Dividends are sticky

- Dividends follow earnings

* Payment Procedures

* Why do firms pay dividends?

- Dividends don't matter: The Miller Modigliani Theorem

- Dividends are taxed heavier than capital gains: Arguments against dividend payments

* Evidence from ex-dividend day price changes

- Dividends are more certain than capital gains: The bird in the hand fallacy