Chapter - 18

Dividend Policy

Practical Consideration in Paying Dividends

Financial Need of company. Shareholders Expectations. Closely / Widely Held Company. Constraints on Paying Dividends.

Legal Restrictions Liquidity Borrowing Capacity Access to the Capital Markets Restrictions in Loan Agreements

Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd.

Stability of Dividends
Constant Dividend per Share or Dividend

Rate. Constant Payout. Constant Dividend per Share Plus Extra Dividend.

Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd.

Significance of Stability of Dividends

Resolutions of investors uncertainty. Investors desire for current income. Institutional Investors Requirement. Raising Additional Finances.

Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd.

Forms of Dividends
Cash Dividends Bonus Shares (Stock Dividend). Advantages for Shareholders and Company. Limitations of Bonus Issue. Conditions for Issue of Bonus Shares.

Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd.

Corporate Dividend Behaviour

Lintners Model
DIVt = a +b * p * EPS t + (1 b)DIVt 1+ et