BUSINESS HINTS || Things to consider on dividend determination before it's distribution to shareholders

The dividend determination depend much on the rate of division of earnings and profit between payments to shareholders and investors of the capital. Dividend policy is determined by the following factors;


Let first see the meaning of dividend,
A dividend is a distribution of a party of earnings of the company or the payment from the company’s profit that made by the company to capital investors.
The dividend that can be issued as cash payments, shares of stock, or other properties as how the management and the board of directors prefers.


Now these are the Things to consider on dividends determination;

Stability of earnings
As the company earning more and constant, the dividend to investors become stable and more preferable for them to invest more and more.
While when the earning are not stable the dividend also become low.

Dividend policy of competitive firms.
The dividend policy can be affected by competitor’s policies. Investors prefer the firm that have favorable policies unlike those with stiff one.

Growth of the company.
Company that grows, earning higher and acquiring high profit prefer to pay their shareholders high rate of return so as to make them happy hence they will be influenced to invest the capital more and more.

Profit rates
Profit of the firm affects the dividend in both ways, positive and negatives.
As the profit acquired is large, the dividend become large while when it is low the dividend also will be low.

Legal requirements and government policies.
The companies are much affected by government policy at large.
The tension of legal and government policy led the company to produce low or higher hence the dividend to investors become less or higher accordingly.

Taxation policy.
Taxation policy affects the film largely in both ways, positive and negatives. High tax reduce the profit ratio hence the dividend become low while the vise verse is true.