Abstract
The dividend policy is one of the most important financial policies, not only from the viewpoint of the company, but also from that of the shareholders, the consumers, the workers, regulatory bodies and the Government. For a company, it is a pivotal policy around which other financial policies rotate. The value of the corporate securities depends, to a great extent, on the dividend. Thus, in deciding upon the financial structure of a company, the dividend needs to be assigned due consideration.
Once a company makes a profit, the board of directors must decide what to do with those profits. They could continue to retain the profits within the company, or they could pay out the profits to the owners of the firm in the form of dividends.
Once a company decides to pay dividends, a somewhat permanent dividend policy should be established, which would impact on investors, and the perceptions of the company in the financial markets, by providing information concerning the firm's performance. The choice of the appropriate dividend policy depends on the preferences of investors and potential investors as well as on the company's capital structure and its future plans.
