What is dividend policy?

Dividend policies are regulations and instructions that companies develop and implement as a means of securing payments to dividends to shareholders. Determination of specific dividend policy is the advantage of the company and shareholder. In order to ensure a feasible policy, society should develop a viable policy and then launch this policy through a number of test scenarios to determine the impact of dividend policy on business.

In many cases, society will decide to express the provisions within dividend policy. This is definitely an advantage of the shareholder, because a well -defined policy facilitates the projection of the amount of payout for a given period, and it would be possible to determine the size of the dividends that will be issued. If dividend policy is well defined and documented, it is easy for shareholders to get a written copy and thus fully informed about how policy works.

But there are cases where the dividend policy is not so gooddocumented. If this is the case, investors sometimes establish their prerequisites about the upcoming payouts for what happened in the past. Although less systematic, it is still possible to project more or less accurate estimate of the dividend payout.

In cases where dividend policy is not specifically defined, investors often look at history to find out any trends that have appeared in the past. If dividends payments have been more or less constant over the past few years and there has been no loss of business volume, it is reasonable to assume that payments will still be to the same extent as before. However, if the history of dividends is volatile, the shareholder may try to find out what factors have led to movement up and mines and determine whether any of these factors is relevant to the current dividend period.

in expressed and expectedThe dividend procedures are less common that dividends will increase. Part of the reason is that companies tend to look carefully at undivided earnings and want to make sure that the increased level of earnings will be maintained in the long term. Once this ascending trend is considered more or less permanent, society may decide to increase dividends.

It is much more common to reduce dividends. This usually happens because the volume of business is reduced, which is not expected to be reopen in the foreseeable future. Other times, the decline may be due to the need to maintain more money at hand for capital expenses. In both of these scenarios, companies tend to inform shareholders in advance that these factors exist and there will be chances in dividends to meet Challenge to remain profitable.