What are the factors to keep in mind while framing dividend policy?

There are several factors which affect dividend policy, the most important of which are the following: (a) legal rules, (b) liquidity position, (c) the need to pay off debt, (d) restrictions in debt contract, (e) rate of expansion of assets, (f) profit rate, (g) stability of earnings, (h) access to capital markets, (i) …

What are the factors which you will consider while framing the dividend policy for your organization?

Some of the most important determinants of dividend policy are: (i) Type of Industry (ii) Age of Corporation (iii) Extent of share distribution (iv) Need for additional Capital (v) Business Cycles (vi) Changes in Government Policies (vii) Trends of profits (vii) Trends of profits (viii) Taxation policy (ix) Future …

What are the three theories of dividend policy?

There are three theories: Dividends are irrelevant: Investors don’t care about payout. Bird in the hand: Investors prefer a high payout. Tax preference: Investors prefer a low payout, hence growth.

What are the types of dividend policy?

There are three types of dividend policies—a stable dividend policy, a constant dividend policy, and a residual dividend policy.

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What are the objectives of dividend policy?

The most important objective of dividend policy is the improvement of the financial health of the company. This objective also takes into consideration shareholder’s wealth as the shareholder of the company plays a very important role in the company’s growth.

What is dividend policy and explain its objectives?

Dividend policy refers to the decision of the board regarding distribution of residual earnings to its shareholders. The primary objective of a finance manager is the maximization of wealth of the shareholders. … There is an inverse relationship between dividend payment and retained earnings.

What are the various factors affecting dividend policy?

There are several factors which affect dividend policy, the most important of which are the following: (a) legal rules, (b) liquidity position, (c) the need to pay off debt, (d) restrictions in debt contract, (e) rate of expansion of assets, (f) profit rate, (g) stability of earnings, (h) access to capital markets, (i) …

What are the two main theories of dividend?

Dividend decision consists of two important theories which are based on the relationship between dividend decision and value of the firm.

  • Relevance Theory of Dividend – Walter`s model, Gordon`s Model.
  • Irrelevance Theory of Dividend – Modigliani and Miller`s Approach.

What are the two main theories of dividend explain?

Some of the major different theories of dividend in financial management are as follows: 1. Walter’s model 2. Gordon’s model 3. Modigliani and Miller’s hypothesis.

What is dividend irrelevance theory?

The dividend irrelevance theory holds that the markets perform efficiently so that any dividend payout will lead to a decline in the stock price by the amount of the dividend. … As a result, holding the stock for the dividend achieves no gain since the stock price adjusts lower for the same amount of the payout.

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