Transcript Types of Dividend Policies

Types of Dividend Policies
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Types of Dividend Policies
1) Policy of No Immediate Dividend
2) Stable Dividend Policy
3) Regular Dividend plus Extra Dividend Policy
4) Irregular Dividend Policy
5) Regular Stock Dividend Policy
6) Regular Dividend plus Stock Dividend Policy
7) Liberal Dividend Policy
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1.Policy of No Immediate Dividend.
 Management keep profits for its own growth.
 Company should grow fast and expand big.
 Fails in long time run.
 Generally followed by distribution of bonus shares.
 Rarely used policy in today's market.
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2.Regular or Stable Dividend Policy.
 Paying regular amount of dividend every year.
 Raises prestige and credit of the company in market.
 Helps in raising long term finance in future.
 Price of the shares will remain high.
 Share holders remain happy.
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3.Regular Dividend plus Extra Dividend policy.
 Regular Dividend(RD) + Extra Dividend(ED) is
paid.
 Policy adopted when company has earned extra
points(profits).
 Policy is removed when earnings are normal.
 System not found in India.
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4.Irregular Dividend Policy.
 Company doesn’t pay fixed dividend regularly.
 Changes yearly depending on the earnings.
 Used by firms having unstable earnings especially in
luxury goods.
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5.Regular Stock Dividend Policy.
 Firm pays dividend in form of shares instead of cash
for some years regularly.
 Applied when firms face liquidity crunch.
 Not advisable in long term because numbers of
shares will increase every year and earning per share
will decrease.
 Affects adversely to company's credit and share
value.
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6.Regular Dividend plus Stock Dividend Policy.
 Cash + Shares(Stock) = Complete Dividend.
 Policy is Justified when
a) Firm wants to maintain its Regular Dividend
Policy
b) Wants to retains cash for Expansion.
 Firm wants give benefits of its earnings to
shareholders but lacks liquidity
 Limitations of Regular Dividend Stock Policy
applicable.
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7.Liberal Dividend Policy.
 Major part of earnings is given to shareholders and
minimum is retained by the firm.
 Rate or Amount of Dividend in not fixed.
 Higher the profit, Higher the dividend.
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