Dividend Policy
BY: WAFAA OMAI
ADVANCED FINANCAIL MANAGEMENT
The purpose of this paper is to help management must decide on the form of the dividend distribution, generally as cash dividends or via a share buyback. Various factors may be taken into consideration: where shareholders must pay tax on dividends, firms may elect to retain earnings or to perform a stock buyback, in both cases increasing the value of shares outstanding. Alternatively, some companies will pay "dividends" from stock rather than in cash.
The purpose of an optimal dividend policy should be to maximize shareholders’ wealth. This depends on both current dividends and capital gains. Capital gains can be achieved by retaining risome earnings for reinvestment and dividend growth in the future.
INTRODUCION
Dividend represents a share profit distributed to shareholders of a corporation, according to a certain payout ratio or more precisely according to certain dividend policy. Prudent companies save their cash until opportunities arise for acquisitions that have a real effect on earnings. Barring that, companies can decide to return cash to shareholders through dividends rather than buybacks. Shareholders can then decide for themselves whether to buy more company shares with their dividend income or to use it on something else. Although dividend payments lead to taxes for investors, they give the individual more control than do share buybacks
I- What is “dividend policy”? Dividend policy decisions about when and how much of earnings should be paid as dividends. Earnings that are paid out as dividends cannot be used by the firm to invest in projects with positive net present values—that is, to increase the value of the firm. The dividend policy that maximizes the value of the firm is said to be the optimal dividend policy. Dividend policy is controversial. Includes these elements:
1. High or low payout? 2. Stable or irregular
ADVANCED FINANCAIL MANAGEMENT
The purpose of this paper is to help management must decide on the form of the dividend distribution, generally as cash dividends or via a share buyback. Various factors may be taken into consideration: where shareholders must pay tax on dividends, firms may elect to retain earnings or to perform a stock buyback, in both cases increasing the value of shares outstanding. Alternatively, some companies will pay "dividends" from stock rather than in cash.
The purpose of an optimal dividend policy should be to maximize shareholders’ wealth. This depends on both current dividends and capital gains. Capital gains can be achieved by retaining risome earnings for reinvestment and dividend growth in the future.
INTRODUCION
Dividend represents a share profit distributed to shareholders of a corporation, according to a certain payout ratio or more precisely according to certain dividend policy. Prudent companies save their cash until opportunities arise for acquisitions that have a real effect on earnings. Barring that, companies can decide to return cash to shareholders through dividends rather than buybacks. Shareholders can then decide for themselves whether to buy more company shares with their dividend income or to use it on something else. Although dividend payments lead to taxes for investors, they give the individual more control than do share buybacks
I- What is “dividend policy”? Dividend policy decisions about when and how much of earnings should be paid as dividends. Earnings that are paid out as dividends cannot be used by the firm to invest in projects with positive net present values—that is, to increase the value of the firm. The dividend policy that maximizes the value of the firm is said to be the optimal dividend policy. Dividend policy is controversial. Includes these elements:
1. High or low payout? 2. Stable or irregular