How does type of industry affect dividend policy?
Type of Industry Industries, where earnings are stable, may adopt a consistent dividend policy as opposed to the industries where earnings are uncertain and uneven. They are better off in having a conservative approach to dividend payout.
What factors influence the dividend policy of a company?
The financial matters like trend of profit, existence of earned surplus, cash position, reaction of shareholders, economic policy of the nation, need for expansion, and nature of the enterprise trade cycle, age of the company, government taxation policy are determinants of dividend policy.
How do growth prospect affect dividend policy?
Firms with lower level of growth opportunities pay higher dividends, ceteris paribus. personal connections with other resources form their social capital (Burt, 1992). The relationship between high growth firms and dividend payout is weaker for Bumiputera firms, ceteris paribus.
How does stability and growth of sales affect the dividend of the firm?
Stability of Earnings: Stability of earnings also has a significant effect on the dividend policy of a firm. Normally, the greater the stability of earnings, greater will be the dividend payout ratio. The reason is, that such firms are more confident of maintaining the higher dividends from year to year.
What are the issues in dividend policy?
Taxation Policy: The taxation policy of the Government also affects the dividend decision of a firm. A high or low rate of business taxation affects the net earnings of company (after tax) and thereby its dividend policy. Similarly, a firm’s dividend policy may be dictated by the income-tax status of its shareholders.
What is dividend policy explain different factors affecting dividend decision?
Factors affecting the dividend decision: Amount of Earnings: Amount of dividend paid by a company depends on the company’s current and past earnings. A company with high earning is in a better position to pay dividends and vice versa. Cash flow position: Payment of dividends implies a cash outflow from the company.
What are the six factors that affect dividend policy?
There are six main factors affecting the dividend policy of a firm. These are legal constraints, contractual constraints, internal constraints, growth prospects of a firm, owner considerations, and market considerations.
Which is the internal factors influencing dividend policy?
The corporate, institutional and legal factors that influence the dividend decision of a firm include the growth and profitability of the firm its liquidity position, the cost and availability of alternative forms of financing concerns about the managerial control of the firm, the existence of external (largely legal) …
What are the factors affecting dividend decisions?
The following are the some major factors which influence the dividend policy of the firm.
- Legal requirements. There is no legal compulsion on the part of a company to distribute dividend.
- Firm’s liquidity position.
- Repayment need.
- Expected rate of return.
- Stability of earning.
What are the constraints of dividend policy?
What factors affect dividend decisions?
Factors Affecting Dividend Decision The corporate, institutional and legal factors that influence the dividend decision of a firm include the growth and profitability of the firm its liquidity position, the cost and alternative forms of financing concerns about the managerial control of the firm etc.