This Presentation highlights the determinants of dividend decisions.

1. PRESENTATION ON FACTORS AFFECTING
DIVIDEND DECISIONS/POLICY
Presented by: Ms. Komal
Mahajan
Asst. Prof. in Commerce

2. DIVIDEND POLICY/DECISIONS
Dividend Policy refers to the policy concerned with the
decision as to whether to retain the profits for re-
investment or distribute them among the shareholders as
dividend.

3. DETERMINANTS OF DIVIDEND
DECISIONS/FACTORS AFFECTING
DIVIDEND DECISIONS
1. Legal requirements
2. Earnings of the Company
3. Stability of Earnings of the Company
4. Level of Reserves of the Company
5. Age of the Company
6. Cash position of the Company
7. Clientele Effect
8. Tax Considerations
9. Investment opportunities
10. Dilution of Control

4. LEGAL REQUIREMENTS
Whenever a company decides to pay dividend it has to fulfill
certain legal requirements as stated in Companies Act 2013 and
such other acts with regard to distributable profits, maintenance
of reserves, set off of previous losses and depreciation etc.

5. EARNINGS OF THE COMPANY
Level of Earnings Dividend Decision
High Pay-out
Low Retain

6. STABILITY OF EARNINGS OF THE
COMPANY
Stability of Earnings Dividend Decision
Stable Pay-out
Unstable Retain

7. LEVEL OF RESERVES OF THE COMPANY
Level of Reserves Dividend Decision
High Pay-out
Low Retain

8. AGE OF THE COMPANY
Age of the Company Dividend Decision
Old Pay-out
New Retain

9. CASH POSITION OF THE COMPANY
Level of Cash Dividend Decision
High Pay-out
Low/No Retain

10. CLIENTELE EFFECT
Type of Shareholders Dividend Decision
Salaried, Senior Citizens
etc.
Pay-out
High worth shareholders,
Institutional Investors etc.
Retain

11. TAX CONSIDERATIONS
Inclusion of majority of
shareholders in Tax
Bracket
Dividend Decision
No Pay-out
Yes Retain

12. INVESTMENT OPPORTUNITIES
Availability of
Investment
Opportunities
Dividend Decision
No/A few Pay-out
Yes Retain

13. DILUTION OF CONTROL
Dilution of Ownership
acceptable
Dividend Decision
Yes Pay-out
No Retain

14. ACCESS TO CAPITAL MARKETS
Access to Capital
Markets
Dividend Decision
Easy/Yes Pay-out
Difficult/No Retain

15. INFLATION
Level of Inflation Dividend Decision
Low Pay-out
High Retain