Essay on Dividend Policy of Large Publicly-Traded Company: Tesco

1807 Words Apr 28th, 2012 8 Pages
Assignment Title:
Dividend Policy of Large Publicly-Traded Company: TESCO

Kristina Danielyan
Student ID: I075807

CONTENT

1. Introduction……………………………………………………………………Page 2 2. DIVIDEND POLICY………………………………………………………….Page 2 2.1. Dividend Policies: advantages and Disadvantages …………………………Page 3 2.1.1. Fixed Percentage pay-out ratio Policy……………………………………..Page 3 2.1.2. ZERO Dividend Payment Policy …………………………………………..Page 3 2.1.3. Constant or Steadily Increasing Dividend Policy………………………….Page 3 2.2. Dividend Policies in Practice………………………………………………….Page 4 2.3. Effect of Dividend Policy on Shareholder Wealth…………………………..Page 5 3.
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Facts are proving that in 2006 TESCO stepped to the path when the Management has been confident that the Company reached a new, stable profit level.

The following financial data summary from the last half year update of TESCO comes to prove the stability of the company:

Group Sales up 8.8% Group Underlining Profit up 6,2% Trading Profit up 4,5%

Another fact:

• Over 500m GBP has been invested to reduce of more than 3000 products prices. This has been done for reducing inflation for company’s customers. TESCO plc. Official Website (www.TESCOplc.com)

It is also to be mentioned that TESCO is practicing one of the alternatives to cash dividends - Share repurchase. They operate a Dividend Reinvestment Plan well-known generally as “DRIP”, making easy for investors to re-invest their dividend pay-outs immediately back into the company in the form of new shares. On the other hand it turns to the additional burden and boring paperwork to do for the company.

“Many investors see dividends as "money for nothing", but the implications surrounding paying and receiving dividends can mean a lot of work for both the company and the investor. If you reinvest your dividends through a DRIP or equivalent, the paperwork and tracking of basis can become quite difficult” this view has been

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