Dividend Policies and Decisions

Dividend policy determines the division of earnings among payments to stock holder's ad re-investment in the firm.  Hence now it looks at the following aspects as:

i)   How much to pay - in the four major alternative this encompassed for dividend policies.

1. Constant Payout Ratio
2. Constant Amount of Dividend per Share
3. Residual Dividend Policy
4. Fixed Dividend plus Extra

ii) Whenever to pay - paying interim or final dividends

iii) Why dividends are paid - this is explained by the various theories which has to determine the relevance of dividend payment that is:

1. Dividend irrelevance theory (MM)
2. Clientele theory
3. Bird in hand theory
4. Signaling theory
5. Agency theory
6. Residual dividend theory

iv) How to pay - cash dividends or stock dividends.