Forms of Dividend Policy

Forms Of Dividend Policy

Dividend policy depends upon the nature of the firm, type of shareholder and profitable position. On the basis of the dividend declaration by the firm, the dividend policy may be classified under the following types:

^§    Regular dividend

^§    Stable dividend  policy

^§    Irregular dividend  policy

^§    No dividend  policy.

Regular Dividend Policy

Dividend payable at the usual rate is called as regular dividend policy. This type of policy is suitable to the small investors, retired persons and others.

Stable Dividend Policy

Stable dividend policy means payment of certain minimum a mount of dividend regularly. This dividend policy consists of the following three importa nt forms:

Constant dividend per share

Constant payout ratio

Stable rupee dividend plus extra dividend.

Irregular Dividend Policy

When the companies are facing constraints of earnings and unsuccessful business operation, they may follow irregular dividend policy. It is one of the temporary arrangements to meet the financial problems. These types are having adequate profit.

For others no dividend is distributed.

No Dividend Policy

Sometimes the company may follow no dividend policy because of its unfavourable working capital position of the a mo unt required for future growth of the concerns.

Forms Of Dividends

Cash Dividend

If the dividend is paid in the form of cash to the shareholders, it is called cash dividend. It is paid periodically out the business concerns EAIT (Earnings after interest and tax). Cash dividends are common and popular types followed by majority of the business concerns.

Stock Dividend

Stock dividend is paid in the form of the company stock due to raising of more finance. Under this type, cash is retained by the business concern. Stock dividend may be bonus issue. This issue is given only to the existing shareholders of the business concern.

Bond Dividend

Bond dividend is also known as script dividend. If the company does not have sufficient funds to pay cash dividend, the company promises to pay the shareholder at a future specific date with the help of issue of bond or notes.

Property Dividend

Property dividends are paid in the form of some assets other than cash. It will distributed under the exceptional circumstance. This type of dividend is not published in India.