Types of dividend policy, Financial Management

TYPES OF DIVIDEND POLICY

1. Regular dividend policy: Payment of dividend at standard rate is known as regular dividend policy.

2. Stable dividend policy: Payment of fixed minimum amount of dividend regularly is known as stable dividend policy.  This may take the form of one of the following forms.

Constant dividend per share:  Fixed dividend per share is paid irrespective of earnings year after year and a reserve for dividend equalization is created to cover the fluctuations in earnings.

Constant Payout Ratio (P/O):  Under Constant Payout Ratio policy, a predetermined percentage of earnings is paid as dividend every year.

Stable rupee dividends plus extra dividend:  Under Stable rupee dividends plus extra dividend technique, a constant low dividend per share is paid, with an extra dividend in years of high profits.

3. Irregular dividend policy:

Under Irregular dividend policy, dividend payment is irregular.  The dividend policy depends on so many other factors which may have a direct impact on the availability of funds in the company.

4. No dividend policy:

Under No dividend policy, the company has a policy of not paying dividend to any share holder.

Posted Date: 10/16/2012 1:19:57 AM | Location : United States







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