Problem
As the CFO of a small, publicly-traded business, you have been asked to develop a policy for shareholders to determine what dividend payout policy you will follow. You have been asked to determine if a dividend should be paid, and if so, what that policy would be (paid from excess cash, shareholder repurchase, or equity; frequency of payment; the amount of payments; etc.). In addition to these considerations, address the following:
1) What factors would you need to investigate and consider as part of your decision-making process?
2) What signal will your decision make to the market about your company?
3) Provide an example of an actual company that follows your suggested policy, and the investor response that this company has received as a result of this policy.
4) How would your recommendations be the same or different if this were a large company?