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Understanding Dividend Policy Types

This document discusses dividend policy and its key aspects. It defines dividends as the portion of a company's profits distributed to shareholders. A dividend policy refers to the management's policy for distributing earnings to shareholders. There are various types of dividend policies including residual, regular, stable, and irregular dividend policies. The document also outlines many factors that influence a company's decision around its dividend policy such as industry type, ownership structure, future financial needs, and profitability.

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monika thakur
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144 views13 pages

Understanding Dividend Policy Types

This document discusses dividend policy and its key aspects. It defines dividends as the portion of a company's profits distributed to shareholders. A dividend policy refers to the management's policy for distributing earnings to shareholders. There are various types of dividend policies including residual, regular, stable, and irregular dividend policies. The document also outlines many factors that influence a company's decision around its dividend policy such as industry type, ownership structure, future financial needs, and profitability.

Uploaded by

monika thakur
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

FINANCIAL

MANAGEMENT
DIVIDEND POLICY
INTRODUCTION:
Meaning of dividend:

The term dividend refers to that part of profit


of a company which is distributed by the
company among its shareholders.

It is the reward of the shareholders for


investments made by them in the shares of the
company.
The term dividend includes:

 1. Interim Dividend
2. Final Dividend
Meaning of Dividend Policy

Dividend policy refers to the policy


that the management formulates in
regard to earnings for distribution as
dividend among shareholders.
SOURCES OF DIVIDEND

 PROFITS
Current year profits
Past year profits

 RESERVES
 Past year profits transfered to reserve
DIVIDEND POLICY
[Link] dividend policy
2. Regular dividend policy
3. Stable dividend policy
4. Irregular dividend policy
5. No dividend policy
RESIDUAL DIVIDEND POLICY

 Quantity of profits left over


 Companies to finance capital
expenditure
 Reduces the occurrence of raising
external fund
 Reduces the issue of new stocks
REGUALAR DIVIDEND POLICY

1. Regular and sizeable dividend flow


2. Maintain financial flexibility
3. Pays annual dividends
4. Prestige and credit standing
5. Leads to stability
6. Eliminates uncertainty
STABLE DIVIDEND POLICY

 Constant dividend policy


 Constant payout ratio
 Constant rupee dividend, plus extra
IRREREGULAR DIVIDEND
POLICY
 Decide application of profits
 Uncertainty of earnings
 Unsuccessful business
operation
NO DIVIDEND

 Lack of liquidity
 Unfavourable working capital
position
 Requirement of fund for future
expansion
FACTORS AFFECTING DIVIDEND
POLICY
1. Type of Industry
2. Ownership Structure
3. Age of Corporation
4. The Extent of Share Distribution
5. Different Shareholders Expectations
6. Leverage
7. Future Financial requirements
8. Business Cycle
9. Change in Government Policies
10. Profitability
11. Taxation policy
12. Trends of profits
13. Liquidity
14. Legal Rules
15. Inflation
16. Control Objectives

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