One main reason for dividend policy is based on the manager’s belief that investors prefer stable dividends with sustained growth. This kind of dividend signals to the investor the firm has reached a steady state growth i.e. a mature market position. A company usually only begins to consider releasing dividends once it has established regular and predictable operations cash flows. However, dividends can also act as a negative signal telling investors that the firm’s growth rate is slowing. Increasing the dividend can, on one hand, signal the manager’s perspective for future growth and optimism over future cash flows; on the other hand, increasing the dividend can also signal a lack of investment opportunities. The use of dividend payouts has steadily decreased over the last 30 years. This trend is in part related to the changes in dividend tax rate, however, I believe the majority of this trend or trends can be attributed to changes in investor preferences. The dividend payout decision is ultimately chosen by a manager, whose main objective is to satisfy shareholder
One main reason for dividend policy is based on the manager’s belief that investors prefer stable dividends with sustained growth. This kind of dividend signals to the investor the firm has reached a steady state growth i.e. a mature market position. A company usually only begins to consider releasing dividends once it has established regular and predictable operations cash flows. However, dividends can also act as a negative signal telling investors that the firm’s growth rate is slowing. Increasing the dividend can, on one hand, signal the manager’s perspective for future growth and optimism over future cash flows; on the other hand, increasing the dividend can also signal a lack of investment opportunities. The use of dividend payouts has steadily decreased over the last 30 years. This trend is in part related to the changes in dividend tax rate, however, I believe the majority of this trend or trends can be attributed to changes in investor preferences. The dividend payout decision is ultimately chosen by a manager, whose main objective is to satisfy shareholder