Note: Sample below may appear distorted but all corresponding word document files contain proper formattingExcerpt from Term Paper:
It carries the balanced and effective cash flow in a long-term period and fosters the value of a firm. The crux is to render firms more adaptable to future changes of environments and realize value creation and continuous growth. Since value creation happens to be the initial stage of value management, therefore the main feature of a dividend policy founded on value management and rising it to realize the maximum of a firm's value, and foster enterprise's long-term development while considering the dividend policy. However dividend policy based on value management concentrates on the firm's long-term sustainable development, but does not give attention to the firm's short-term state increasingly. (Wang, 2006)
Discussion of stock valuation inexorably results to consideration of the role of dividends. A firm's fundamental position at this point is dependent on one's attitude toward (i) the impact of subdivision of the stream of income which supports the total capital structure and (ii) the impact of subdivision of the stockholder's share between dividends and retained earnings. This is similar to analysts of the cost of capital with regard to the impact of dividend policy on stock value. The people who consider that the shape of capital structure degree of leverage has no impact on the cost of capital also are of the perception that the value of a share of stock does not depend on the rate of dividend, and those who are of the idea that income subdivision is important for the cost of common stock in particular. (Dougall; Miller; Vandell, 1963)
Does a firm's dividend policy matter?
Since the past two decades, the issue of the impact of dividends on the prices of stock has been controversial. Till of late, the academic finance profession jointly had presented with no believable justification for corporate dividend payments. Till this point, there were just two positions on the issue of dividend which were vehemently defended by financial economists. The first one revolves around (i) dividend are extraneous. This implies that if companies retain their earnings or pay them out to the stockholders, it hardly matters to the investors on the collective front. (ii) Increased dividends result on lower stock prices as the investors who come within the tax bracket are compelled to pay higher taxes on dividends compared to capital gains. However there have at no point of time any question that dividend when announced in large amount have led to increases in stock prices, and that dividend skipping is certain to send prices on a downward trend. Nevertheless the present meaning of this phenomenon has been that these types of changes in the dividend policy give information to the market merely regarding the firm's future earning potential. (Chew, 1986)
The encouraging reaction to the declarations of increased dividends hence is silent regarding a preference by investors for dividends over capital gains. Moreover this "information effect" has therefore been implicated as being congruent with the dividend irrelevance proposal. This implies that investors on the whole are only interested on the net returns, and the intensity of total stockholders returns is not affected by decisions of management to pay out a portion of that return in the shape of dividends. A third viewpoint nevertheless has of late suggested an encouraging economic justification for corporate dividends in supplying information. Supporters of this comparatively recent line of reasoning observe that management possess considerable inside information regarding its company's promises which it cannot disclose to its investors. (Chew, 1986)
Firms reward their shareholders with cash through dividends which is known as the firm's dividend decision. Dividend distribution out of the earnings is a crucial outlay decision which should be done regularly. The dividend decision of a company is a financial one and the goal of any financial decision of a firm is making growth strides for the organization. The academic finance profession had given with no credible reason for corporate dividend payments. There were just two standing on the issue of dividend which was strongly supported by financial economists. These are (i) dividend are needless.(ii) increased dividends result on lower stock prices as the investors who come within the tax bracket are compelled to pay higher taxes on dividends compared to capital gains.
Chamberlain, Neil. W. (1962) "The Firm: Micro-Economic Planning and Action." McGraw-
Chew, Donald. H. (1986) "Six Roundtable Discussions of Corporate Finance" Quorum
Dougall, Herbert E; Miller, Merton H; Vandell, Robert F. (1963, May) "Management of Corporate Capital: Discussion" the Journal of Finance, vol. 18, no. 2, pp. 311-318.
Harvey, Campbell R. (1995) "Capital Structure and Payout Policies." Retrieved 12 September, 2007 at http://www.duke.edu/~charvey/Classes/ba350/capstruc/capstruc.htm
Mackintosh, a.S. (1963) "The Development of Firms: An Empirical Study with Special
Reference to the Economic Effects on Taxation." Cambridge University Press.
N.A. (n. d.) "Chapter 10: Dividend Policy." Retrieved 12 September, 2007 at http://www.hss.caltech.edu/courses/2005-06/Spring/bem107/Readings%20for%20Course/Damodaran%20Book/Chap10.pdf
N.A. (2005) "Distribution of Dividend- at what rate?" Retrieved 12 September, 2007 at http://www.easternbrain.com/2005/12/07/distribution-of-dividend-at-what-rate/
Wang, et. al. (2006) "The Influences of Value-Based Management on Dividend Policy."
Journal of American Sciences, vol. 2, no. 4. pp: 35-39.
"Dividend Policy Firm's Dividend Policy" (2007, September 13) Retrieved October 27, 2016, from http://www.paperdue.com/essay/dividend-policy-firm-73309
"Dividend Policy Firm's Dividend Policy" 13 September 2007. Web.27 October. 2016. <http://www.paperdue.com/essay/dividend-policy-firm-73309>
"Dividend Policy Firm's Dividend Policy", 13 September 2007, Accessed.27 October. 2016, http://www.paperdue.com/essay/dividend-policy-firm-73309
Dividends A regular cash dividend is paid out of the company's cash supply. The dividend can be at a fixed rate, or can be loosely tied to the company's net income. This is the most common form of dividend, and is paid under most circumstances. Whereas a regular cash dividend is a recurring dividend, an extra cash dividend is a non-recurring dividend (Investopedia, 2012). This is a one-time dividend that is
Organization Dividends Why company pay dividend to shareholders? Why dividends not really affect the shareholders? What the shareholders prefer low or high dividends? Why, Explain? A company may opt to pay dividend to its shareholders in order to make considerable earnings of the corporate profits. State's law varies on how dividends ought to be paid. Dividends do not really affect the shareholders because it is not compulsory for a company to pay
Dividend Policy What are the practical considerations which are likely to influence a firm's dividend policy? Does a firm's dividend policy matter? Inside a firm's dividend policy there are a number of different factors that will have an impact upon: the amount and if one will be paid to shareholders. The most notable include: the growth rate of the company, credit agreements, earnings stability, maintaining control over the float, uncertainty, the ability
Dividend Policy for Home Retail Group Plc and Yell Group Plc 2008, 2009, 2010 Once a company is profitable, the executives must determine what to do with the profits. The firm may continue to retain the profits, or it may pay out the profits to the owners/shareholders of the firm in the form of dividends. Once the firm decides on whether or not to pay dividends, it may establish a semi-permanent
Dividend Tax Capital gains and dividend taxes were both initiated in the early 1970's, by the Democratic Party. Before dividend taxes were enforced, the government made its money through higher aftertax yields, The dividend tax was originally supposed to be a progressive measure, so that the wealthiest paid correspondingly more than the poorest because they had benefited more. At this time, only the wealthy invested in stocks. This is no longer
3.0 Dividends According to the Miller-Modigliani Hypothesis, dividends do not affect value. This theory reasons that if a firm's investment policy doesn't change, the value of the firm cannot change with dividend policy. Therefore, investors should be indifferent to receiving either dividends or capital gains. but, the Miller-Modigliani Hypothesis has underlying assumptions that don't hold in the real work. It assumes there are no tax differences between dividends and capital gains
Therefore, 'on balance, much empirical evidence supports the view of dividends as a signaling device'. There have been reported instances when the management has deliberately reduced the expected worth of the dividend, considered to be a strategic decision aimed at the improvement of the financial flexibility and growth prospects on long-term scale. However the managers of the company have practiced such options, where they have 'used dividend actions to convey