Unit 4

Dividend policy
Meaning of Dividend:

• Dividend is “that part of profit distributed among share holders which includes normal
rate of interest plus a return for the risk assumed”.

Forms of dividend:

• Cash Dividend: Most companies pay the dividends in the form of cash
• Stock Dividend: A Stock dividend represents a distribution of shares in lieu of or in
addition to the cash dividend.
• Scrip Dividend: In the form of promissory notes.
• Bond dividend: In the form of bonds or bills of exchange
• Property dividend: In the form of assets.
Types of dividend policy:
• Regular dividend policy
• Irregular dividend policy
• Stable dividend policy
• No dividend policy
Determinants of dividend policy:

• Stability of earnings
• Financial policy of the company
• Liquidity of funds
• Dividend policy of competitors
• Past dividend rates
• Ability to borrow
• Growth needs of the company
• Tax position of the shareholders
• Legal requirements
• Thank you