09/09/2014
Information context/ signals hypotheses: this concept show that the dividend policy has very effective on stock holders mind. It can show good or bad importation on its stake holders, because investment come from stock holders and that become base for investment.
Clientele Effect: change of policy become cause of change of stock holders. The switching of client is clientele effect.
Dividend Stability: it’s very important to stable the dividend to make sure your customer satisfies and to improve your company’s image in market.
Important key points how to set dividend
v Dividend will be according to forecast.
v Dividend will be according to inflation.
v Dividend will be according to the prediction of shareholders.
Basic models for dividend planning:
Residual dividend model | Low regular dividend plus extra |
| Dividend = net income – Retained earnings (required for next year/new project) | Set a specific amount that must be paid and plus that amount that we all extra from fixed divided like as bounce. |
Note: required amount of retained earnings are equal to Equity Ratio X total capital Budget
e.g. (60%) X (1,00,000) = 60,000 that amount will be minimize from total income (2,00,000) that mean dividend will be 1,40,000
Payment Procedures for dividend: that procedure consists of 4 steps following.
1. Declaration date: dividend declaration date that is usually the annual meeting of company.
2. Holder of recorded data: verify and renew the information about shareholders.
3. Ex-dividend date: the date company closes the record of its shareholders.
4. Payment Date: company transfer amount to its dividend account and give the check.
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