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Finance & Accounting
Pages 5 (1255 words)
FINANCIAL MANAGEMENT by Student’s name Code+ course name Professor’s name University name City, State Date A company’s dividend policy refers to its decision to pay out cash to its shareholders, in what amount, and in what fashion. The most apparent and vital element of this policy in a company is the firm’s decision whether to pay a cash dividend, how often it must be distributed, and how large the cash dividend should be.
Non-conventional types of dividend payments, particularly share repurchases are in most cases used currently, and therefore, the dividend decision is much more multifaceted and complex than it was in the past. In addition, there are more significant types of shareholders who should be satisfied today-particularly institutional investors-while managers once merely have to satisfy individual stockholders. Therefore, n increase in the dividend payout is taken to be good news. The company is showing that it not only has positive cash flows, however these cash flows are rising sufficiently to validate an elevated payout to shareholders. The company “proves” its cash flow by paying out some of that cash to its shareholders. This means that higher dividends might indicate lasting greater earnings for the company. How this argument has been contradicted that the dividend policy is irrelevant. It is for this reason that this paper will examine on the fact that company's dividend policy is irrelevant to its market value. ...
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