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  • Finance PPT 2

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    Aarti
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    This document discusses objectives and constraints of dividend policy, including a firm's need for funds, shareholders' need for income, and legal and financial restrictions on paying dividends. It also examines strategies for stable dividends, such as constant dividend per share or payout ratio. Stable dividends can resolve investors' uncertainty and meet institutional requirements while raising new finances. The document compares cash and stock dividends, noting tax benefits and signaling effects to shareholders, as well as conservation of cash for companies.

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    Finance Ppt 2

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    This document discusses objectives and constraints of dividend policy, including a firm's need for funds, shareholders' need for income, and legal and financial restrictions on paying dividends. It also examines strategies for stable dividends, such as constant dividend per share or payout ratio. Stable dividends can resolve investors' uncertainty and meet institutional requirements while raising new finances. The document compares cash and stock dividends, noting tax benefits and signaling effects to shareholders, as well as conservation of cash for companies.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    2 views16 pages

    Finance PPT 2

    Uploaded by

    Aarti
    This document discusses objectives and constraints of dividend policy, including a firm's need for funds, shareholders' need for income, and legal and financial restrictions on paying dividends. It also examines strategies for stable dividends, such as constant dividend per share or payout ratio. Stable dividends can resolve investors' uncertainty and meet institutional requirements while raising new finances. The document compares cash and stock dividends, noting tax benefits and signaling effects to shareholders, as well as conservation of cash for companies.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    of 16

    Introduction

    INTRODUCTION
    OBJECTIVES OF DIVIDEND POLICY
    • Firm's Need for Funds
    • Shareholders’ Need for Income
    Understanding Dividend Policy

    • Firm’s Investment Opportunities and Financial Needs


    Shareholders’ Expectations

    Constraints on Paying Dividends


    Legal restrictions
    1. Liquidity
    2. Financial condition and borrowing capacity
    3. Access to the capital market
    4. Restrictions in loan agreement
    5. Inflation
    6. Control
    STABILITY OF DIVIDENDS

    • Constant Dividend per Share or Dividend


    Rate.
    • Constant Payout.
    • Constant Dividend per Share Plus Extra
    Dividend.
    CONSTANT DIVIDEND PER SHARE POLICY
    DIVIDEND POLICY OF CONSTANT
    PAYOUT RATION
    Significance of Stability of Dividends

    • Resolutions of investors uncertainty.


    • Investors’ desire for current income.
    • Institutional Investors’ Requirement.
    • Raising Additional Finances.
    TARGET PAYOUT AND DIVIDEND
    SMOOTHING: LINTNER’S
    FORMS OF DIVIDENDS
    • Cash Dividend
    • Bonus Shares (Stock Dividend)
    ADVANTGAES

    To shareholders:
    • Tax benefit
    • Indication of higher future profits
    • Future dividends may increase

    To company:

    • Enhance market image


    • Conservation of cash
    • More attractive share price
    LIMITATION

    Shareholders’ Administrative
    wealth costs

    Challenge in financial
    matrices
    1.EPS
    2.P/E ratio
    DIFFERENCE BETWEENT BONUS & SPILT
    SHARES
    Q&A Session
    Thank you

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