Dividend Policy Homework Help

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Every company has a list of shareholders. These shareholders are the virtual owners of the company. However, that doesn’t mean that the profit of the company belongs to them. The dividend policy is the set of rules that a firm or company follows to decide the amount of profits that shall reach the shareholders. It is the decision which is taken by the board of directors in the interest of the company. It is necessary to understand that it is not mandatory for the company to channel the profit entirely and all the time to the shareholders. For instance, during the developing phase, a company can choose to secure the profits made for further investments. As a matter of fact, the shareholders can always get the cash in return of the share they own. Dividend policy not only holds good for the present profits, but also for past profits of the firm. Since the concepts under dividend policy could be multifaceted, Dividend Policy Homework Help shall work towards making the learning simpler.
 

Types of dividend policies

The different types of dividend policies explained in Dividend Policy Homework Help are
 

• Dividend stability policy- This policy is applied by the companies which do not keep looking for a lot of new projects, rather believe in sharing the profits with the shareholders. As the very name suggests, the policy shall provide stability to the shareholders by channelizing constant dividends to investors and securing their earnings. A company following this policy fixes a fraction of the yearly earning which has to be paid to the shareholders through quarterly dividends. For further information, refer Dividend Policy Homework Help.
 

• Residual dividend policy- This policy pays off well for a company in the long term. The basic principle is to secure the balance between the debits and earnings. With the earnings, there is an attached format under which the profit is diverted towards various fields. Namely, reinvestments and current maintenance costs. The amount that remains after this is the residual earning being diverted for the shareholders. This form of dividend policy is often not liked by the shareholders for the obvious reason that it does not guarantee an income within a stipulated time period. For a lucid account on dividend policy, go through Dividend Policy Homework Help.
 

• Hybrid dividend policy- The ideal and most widely accepted dividend policy happens to be the one that provides a blend of residual and stability dividend policy. Under this policy, the company sets up an amount which is fixed dividend for every year. Mostly a meager part of the profits are labeled under this dividend which must be paid every year to the shareholders. The changing economic graph of the company then accordingly paves path for the residual income from the left over profit. This dividend is variable.
 

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