Doea a dividend policy matter Essay Example | Topics and Well Written Essays - 2000 words

Doea a dividend policy matter - Essay congressmanBut the practitioners ar of the opinion that dividend policies do play an important role in this regard. They provide examples in this regard that there are numerous companies whose share prices have jumped to a new high after their announcement to pay regular dividends. The process of paying dividend by companies is considered very important because it sends a efficacious message to outsiders of the association about the future prospects of the brass. If an organization is able to pay out consistent dividends everyplace time to its shareholders, it raise be concluded by the general public that the fundamentals of the organization are very strong.It should be noted in this regard that focusing solely on the dividend policy of an organization is not sufficient. The company essential also have the money that is required to pay dividends to its shareholders. Any companys sources of funds must equal its uses of such funds. If an o rganization pays dividends to its shareholders and this is considered as use of funds, there must be something that has to change in the uses and sources statement. In this regard it could be said that given the investment policy of the firm, the dividend policy decisions of any firm is dependent on the choice of its financing strategy. An organization has to take a decision in this regard whether it wants to rely heavily on external funds to finance its projects and consequently paying back those funds to the providers of finance in the form of higher dividends. The other way is to detain a part of its earnings to finance its growth. Ploughing back of profits is an important tool by which an organization can effectively finance its projects without relying too much on outside sources of funds (Miller, 1977, pp. 261-265). It can be said at this point that generous dividend policies may not be considered as the trump for an organization. The organizations