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.
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