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dividend ratios1 dividend per shares dps earnings to ordinary shareholders number of ordinary sharesspecify cash returns received for all share
access to capital markets and ownership structure ownership structurea dividend policy may be driven with time ownership structure as like in
shareholders expectation and growth stagegrowth stagedividend policy is likely to be influenced with firms growth stage as like a young rapidly
investment opportunity and capital structureinvestment opportunitylack of suitable investment opportunities that is so by positive returns or npv may
taxation position and profitability amp liquidityprofitability and liquiditya companys capacity to pay dividend will be determined primarily with its
legal rules - factors influencing dividenda net purchase rulestates that dividend may be paid from companys profit either past or presentb capital
drawback of stock repurchases1 high pricea company may find it not easy to repurchase shares at their recent value and price paid may be higher to
advantages of stock repurchase1 it may be seen as a true signal since repurchase may be motivated with management belief that firms shares are
stock repurchasethe company can buy back also several of its outstanding shares instead of paying cash dividends this is identified as stock
stock split and reverse splitthis is whereas a block of shares is broken down into smaller units or shares hence the number of ordinary shares rises
advantages of bonus mattera tax advantages shareholders can sell new shares and create cash in form of capital gains such
cash and bonus issue - dividendfor a firm to pay cash dividends it should contain adequate liquid fundsthough under conditions of liquidity and
agency theorythe agency problem between managers and shareholders can be resolved via paying high dividends if retention is low managers are
clientele effect theoryadvance via richardson petit in 1977it stated such different types of groups of shareholders or clientele have different type
tax differential theoryadvanced via lichtenberger and ramaswamy in 1979they argued that tax rate on dividends is higher quite than tax rate on
information signaling effect theoryadvanced via stephen ross in year 1977 he argued such in an inefficient market management can utilize dividend
bird-in-hand theoryadvanced via john leitner in year 1962 and furthered with myron gordon in year 1963 argues such shareholders are risk averse and
mm dividend irrelevance theorysuch was advanced via modigliani and miller in 1961 the theory asserts to a firms dividend policy has no effect on
advantages of residual theory1 saving on floatation costsno require to raise debt or equity capital as there is high retention of earnings that
constant dps plus extra or surplus1 beneath this policy a constant dps is paid every year nonetheless extra dividends are paid in years of
constant amount per share or fixed dps1 the dps is fixed in total amount of irrespective of the earnings level these generate certainty and are
constant payout ratio1 this is whereas the firm will pay a fixed dividend rate as like 40 percent of earnings the dps would consequently fluctuate as
importance and solution of dividend decisionsdividends decisions are integral part of a firms strategic financing decision it is hence a plan of
dividend policies and decisionsdividend policy determines the division of earnings among payments to stock holders ad re-investment in the firm
example of valuation of bonds and debenturesk is contemplating purchasing a 3 year bond worth 40000 carrying a nominal coupon rate of interest of 10