As a Finance Manger what is you role in matters of dividend policy. What will be the alternatives and factors that you may consider before finalizing you dividend policy.

As a Finance Manger what is you role in matters of dividend policy. What will be the alternatives and factors that you may consider before finalizing you dividend policy.

Sol. 5 The dividend policy determines whether to pay out or not to pay out cash dividends to stockholders. It is decided to pay out, dividend policy involves the determination of the payout.

As a Finance manager out role in matters of dividend policy is to maximize owner wealth while providing adequate finance for the company. Dividend cannot be raised immediately. With the increase in company earning. Only when the fiancé manager is confident that the increase earning of company will remain sustain, he will increase the dividend.

There are many factors that we should consider before finalizing dividend policy:-

i)                    Sustainability of earning:- If a company have a stable earning it can distribute higher share of its income as dividend.

ii)                   Need for funds: - Dividends paid to stockholders use funds that the firm could otherwise invest. Therefore, a company running short f cast may decide to pay little or  nor dividends.

iii)                 Management expectations and Dividend policy:-

iv)                 If a firm’s manager perceives that the future is bad, they may reserve firm’s profit for safety. On the other hand if they believe that the good time is coming, they can distribute the large part of earning sa dividend.

v)                  Uncertainty: Payment of dividends reduces the uncertainty in stockholders wind about the company’s financial position.

vi)                 Company growth rate: A company that is rapidly growing, even it profitable, may have to restrict its dividend payment in order to keep needed funds.

vii)               Restrictive covenants: Sometimes there is a restriction in a credit agreement that will limit the amount of cash dividends that my be paid.

viii)              Profitability: Dividend distributions layered to the profitability of the company.

ix)                 Age and size: The age and size of the company bear upon its ease to access to capital market.

x)                  Fax Penalties: possible fax penalties for excess accumulating of retained earnings may result in high dividend payouts.