Are Theories of Dividend Payment Applicable in the Real World

Introduction Dividend is profit distribution of company. It depends on the type of dividend policy the company has. The dividend policy affects the behavior and attitude of investors to the company. Many economists and financial experts have built different theories to explain the impact of dividend policy on society. However, these theories are controversial because they have not been verified in the real world. The decision of the boss to decide the size and timing of the company's next dividend payment is also important to the company and shareholders.

According to the theory of dividend correlation, dividend policy plays an extremely important role for investor's hand, as incorrect decisions may affect the company's capital structure. We are inevitable to pay a dividend, as dividends are derived from the theory that it brings signal effects to investors and it brings customer benefits. On the other hand, paying dividends on a regular basis every year will affect the growth of the company and cause liquidity problems. Large companies like McDonals avoid paying dividends early, pay dividends after creating brand names globally.

The amount paid during the period of holding shares, stocks or funds is usually the percentage of value held. Dividends are called "temporary payments" and are usually paid several times a year. For example, if you have a $ 10,000 stock of Amazing Blue Widget Co. and you have a dividend yield, you may get a dividend of $ 250 per year. "Dividend yield" is the percentage of the total amount you return to you, and the dividend itself is usually a monetary amount. You usually need to pay tax for your dividend

Recently, many people are talking about the importance of dividends. There are only two ways companies can transfer value from business to shareholders. One is a dividend. This is a recurring payment of cash per share. The second is buying own shares that is issued every quarter. Each company maintains its own stock buying program and announces the latest information on a quarterly conference call. So, which is better? To answer this question, you must first define something

Below are the pros and cons of dividends. On the professional side, the company provides a consistent flow of cash income. You can not make money in the form of cash payment. This stability is much higher than the price hike hopes and prayers. Everyone can not rely on whether the stock price goes up, but they can rely on dividend payment. Another expert is a company that keeps increasing dividend payments. These incremental companies will help ensure sound earnings as the company's earnings are sufficient to support the increased dividend payment. Stock prices generally rise in proportion to annual dividend growth