Dividend Policy
A dividend is a part of the profit paid to the shareholder in an organization. The management of the organization has the right to decide the policy for giving a dividend from the earnings to the shareholder. However, an organization is not in the obligation to declare a dividend for the investor. Dividend policy differs from organization to organization. As the management has the only authority to decide dividend rate, dividend amount, and time of dividend payout by considering all other elements that create an impact on the payment of a dividend.
Stocks And Dividends
Stock or equities are generally sold and bought in the Stock Exchange or which is popularly known as the stock market. Stocks are issued in the Stock Exchange for the sole purpose of raising funds for the Corporation or the company itself. Now since an individual has purchased a portion of the Corporation or company, he or she may claim to be a part of the earnings or profit of the company.
Your study group comprises of five members: John, Mary, Connor, Laurel and Christopher. They have been
studying for an upcoming end-of-term exam. As a part of their preparation, they use session themes. Each member
of the study group provides a catch-phrase related to the theme around which they hold a discussion to sift the
best argument. Currently the theme that they are working with is: Theories about Investors’ dividend preferences.
The following catch-phrases are provided by the team members:
John: The homemade dividend strategy argues that investors impose their dividend preference on the firm.
Mary: The bird-in-hand theory suggests that a company can reduce its
dividend payout ratio.
Connor: A company can always increase its stock price by increasing its dividend payout ratio.
Laurel: An increase in a firm's inclination to pay dividends may be because of a decline in profitable investment
opportunities in the future.
Christopher: Relevant or not, frequent changes in dividend policy can harm a firm.
As a leader of this study group, you are required to indicate both the right and wrong arguments with suitable
reasons.
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