Dividend Policies

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  • Topic: Automotive industry, Automobile industry in India, Maruti Suzuki
  • Pages : 39 (12438 words )
  • Download(s) : 20
  • Published : February 1, 2013
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ABSTRACT
The dividend Decision is one of the core elements of modern corporate financial management. A reasonable dividend Decision will help the company in the capital markets and establish a good corporate image for the company's long-term development and create favorable conditions for the listed company's financial decision-making, dividend Decision has a positive significance.

Appropriate dividend distribution Decision can not only set a good corporate image, but also to build the confidence of investors in the company's future prospects, thus creating a good corporate financing environment, the company’s long-term stable development.

The present project aims to study the need for dividend Decision; study the different theories on dividend Decisions; determine the growth rate based on return on equity; and review the dividend Decisions of top automobile companies.

Automobile companies generally follow a Decision of announcing dividend in proportion to their earnings. The average Dividend Payout Ratio of automobile companies is around 30% which means that they are paying out 30% of their earnings in the form of Dividends.

CONTENTS

Chapter No.Name of the conceptPage No.
IIntroduction
Objectives of the study
Scope of the study
Methodology of the study
Limitations of the study
IIReview of Literature
IIIIndustry Profile
IVCompany Profile
VData analysis and interpretation
VIFindings, Suggestions and Conclusion
VIIBibliography

CHAPTER I - INTRODUCTION

INTRODUCTION

The dividend policy is one of the core elements of modern corporate financial management. A reasonable dividend policy will help the company in the capital markets and establish a good corporate image for the company's long-term development and create favorable conditions for the listed company's financial decision-making, dividend policy has a positive significance.

Appropriate dividend distribution policy can not only set a good corporate image, but also to build the confidence of investors in the company's future prospects, thus creating a good corporate financing environment, the company’s long-term stable development.

The dividend policy is influenced by many factors, such as the company's profitability, stock price, financing capability. The distribution of dividends of listed companies are often more complex dynamics, in such an environment study on the impact of factors conducive to a listed company to develop an appropriate dividend policy, financial management and operational activities to achieve The goal is also conducive to the shareholders invest in raising awareness of risk awareness and to facilitate their rational investment.

SCOPE OF THE STUDY

Dividend is paid on share capital. Share capital of both the kinds – equity share capital and preference share capital. However there is a difference in respect to dividend between the two. In case of preference shares, the dividend rate is fixed whereas on equity share capital, the dividend rate is not fixed; it can vary depending upon profits for the year and available cash for disbursement of dividend. Dividend policy omits preference share capital and concerned only with equity share capital.

Can a company distribute its entire profits as dividend? Even if the board of directors wants it that way it is not possible as per provisions of The Companies’ Act. It clearly states that depending upon the percentage of dividend on equity share capital, a certain percentage of profits after tax (PAT) needs to be transferred to General Reserves. Hence 100% of PAT cannot be given away as dividend. Further, the company needs funds for future growth. Where is it going to get it from in case it distributes more dividends? It can raise fresh equity from its existing shareholders as well as the market. However there is “public issue” cost to be taken care of.

This...
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