Divedends

DIVIDENDS

1-Introduction:

Companies issue stocks to get money for various things, which may include: Paying off debt, launching new products, expanding into new markets or regions and enlarging facilities or building new ones. On the other hand, people tend to maximize their wealth by investing their money buying stocks for various reasons such as capital appreciation, which occurs when a stock rises in price and Dividend payments, which come when the company distributes some of its earnings to stockholders.

2-What is Dividends:

A Dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. When a corporation earns a profit or surplus, it can either re-invest it in the business (called retained earnings), or it can distribute it to shareholders. A corporation may retain a portion of its earnings and pay the remainder as a dividend. Distribution to shareholders can be in cash (usually a deposit into a bank account) or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or share repurchase. A dividend is allocated as a fixed amount per share, with shareholders receiving a dividend in proportion to their shareholding. For the joint stock company, paying dividends is not an expense. Retained earnings (profits that have not been distributed as dividends) are shown in the shareholder equity section in the company's balance sheet - the same as its issued share capital.

However, not all companies offer dividends. Many new and smaller companies elect not to pay a dividend. Instead, they use the money that would normally be paid to shareholders to reinvest in the company. By doing this, they are using the money to help the company grow. All these various management decisions depends on the dividends policy that issued for corporations.

3- What is Dividends Policy:

The term ‘dividend policy’ refers to “the practice that management follows in making dividend...