Dividend Policy

Dividend policy theory

The company dividend policy provide tremendous insight into its relationship with shareholders and the help us better understand management's strategy for enhancing shareholder value If the company has s loose dividend policy lacks a track record of paying dividends and the has consistently bought back share at high price ' it might be best and aggressive to look elsewhere for dividend income but if the owner or CEO of the company can book mark all the analytical articles on the dividend investment the archive will be updated as new dividend articles are posted.

The company apply the dividend policy on the bases of this things that.

* Company save its cash equivalents and pay down debt

* Company spends its acquisitions and co on.

* The company reinvest on R&D sector and new projects and expansion of their product line or weight.

* The company distributes its dividends and buybacks.

Three important theories on dividends can help the company to understand that why different companies shareholders have varying interests in dividends;

* Dividend irrelevance

* Tax

* Bird-in-hand dividend irrelevance

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The dividend irrelevance theory is based largely on the important research done by miller and Modigliani who reached the conclusion that in a world of taxes.

Such homemade dividend makes less sense to individual investors due to the more prohibitive trading costs.

Once a company has decided that it will pay a dividend. It can either adopt a (what I will call) firm or loose dividend policy.

Conversely in a loose dividends policy the company will effect and make a decision making process behind the dividend payments.

All else being the value dividends focused investors should prefer to own companies with a firm dividend policy because they provide more transparency.

The firm does not explain its policy there may be less commitment from the board the framework for deciding the policy of dividend to...