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Dividend Policys of Companies - Essay Example
Finance & Accounting
Pages 5 (1255 words)
Customer Name Instructor Dividend Policy Dividend policy is a type of strategy followed by publicly-traded companies in order to plan out the outflow of dividends to shareholders. This policy comprises of the deportment on whether a company would payout profits as dividends or just retain them as retained earnings…
Companies which are in stages of growth or in initial stages normally have a sparing dividend policy because they reinvest or plow back much of their earnings into the company to experience growth and development (Financial Dictionary 2011). Established companies such as blue chips, Unilever and Wal-Mart being some of them, are inclined to relatively liberal dividend payout policies and grant dividends regularly on quarterly or half-yearly basis. For instance, Unilever (bearing a symbol of UL and listed on NYSE) pays a regular dividend every quarter; the most recent payout has been an amount of US$ 0.307 on November 8, 2011. Similarly, Wal-Mart paid a quarterly dividend of US$ 0.365 recently on December 07, 2011; a payment every quarter is being followed by the company. Dividends payment do assure shareholder satisfaction but some research, particularly Modigliani and Miller (MM)’s proposition on irrelevance depicts that a company’s performance and profitability is not affected by its dividend policy. Talking from the shareholder perspective, shareholders are more satisfied when they receive regular flows of dividends, even in small amounts but the factor of regularity ensures their confidence in the company. ...
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