What are the different types of dividend policies?

Answer 1

Types of Dividend Policy:

a. Stable Dividend Policy

b. Fluctuating Dividend Policy

c. Small Constant Dividend per Share plus Extra Dividend.

Forms of Dividend

· Cash Dividend

Cash dividends(most common) are those paid out in the form of a cheque. Such dividends are a form of investment income and are usually taxable to the recipient in the year they are paid.

This is the most common method of sharing corporate profits with the shareholders of the company. For each share owned, a declared amount of money is distributed. Thus, if a person owns 100 shares and the cash dividend is $0.50 per share, the person will be issued a cheque for 50 dollars.

· Stock Dividend

Stock or scrip dividends are those paid out in form of additional stock

shares of the issuing corporation, or other corporation (such as its

subsidiary corporation).

They are usually issued in proportion to shares

owned (for example, for every 100 shares of stock owned, 5% stock

dividend will yield 5 extra shares). If this payment involves the issue of

new shares, this is very similar to a stock split in that it increases the total

number of shares while lowering the price of each share and does not

change the market capitalization or the total value of the shares held.

Answer 2

There are different types of dividend policies that a company can choose to adopt. These include a stable dividend policy, where the company aims to pay a constant dividend amount over time; a constant payout ratio policy, where the company pays out a fixed percentage of its earnings as dividends; and a residual dividend policy, where the company pays out dividends after meeting its investment needs. Other types include a regular dividend policy, where the company pays dividends at regular intervals, and a no-dividend policy, where the company retains all of its earnings for reinvestment.