Dividend Policy Essay
This report focuses on the concept of Dividend Policy used in a firm. It talks about the importance of using a Dividend Policy which is giving a share to the stockholders. A dividend policy is first known as a heavy factor in a company’s stock value and is a set of company rules and guidelines used to decide how much the company will pay out to its shareholders. The report then highlights the common theories and models used in dividend policy decision in an organization. The feasibility of the concept had been further exemplified with the case study of City Lodge Hotels Limited and Microsoft vs Berkshire Hathaway which depicts two companies that do not believe in using a dividend policy and a lodging company that believes in …show more content…
Dividend payout ratio is another important indicator:
Dividend payout ratio = Dividend per share / Earnings per share
This ratio indicates how much of the profit is distributed as dividends to shareholders. The higher the dividend payout ratio, the more attractive the share is to the shareholders.
Dividend payout ratios vary among