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Dividend Policy: How to Decide How Much and When to Pay Dividends to Your Shareholders
1. Understanding Dividend Policy
Understanding Dividend Policy
One of the most important decisions that a company's board of directors has to make is how to distribute the profits generated by the business to its shareholders.
4 steps in dividend payment
This decision is known as the dividend policy, and it involves determining how much of the earnings to pay out as dividends, how often to pay them, and in what form (cash or stock). The dividend policy affects not only the current income of the shareholders, but also the future growth and value of the company.
Therefore, it is crucial for both managers and investors to understand the factors that influence the dividend policy and the implications of different choices.
In this section, we will explore the following aspects of dividend policy:
1.
The types and characteristics of dividends. We will explain the difference between regular dividends, special dividends, and stock dividends, and how they are taxed and accounted for.
2. The dividend irrelevance theory.
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