Dividends of a corporation are declared by its Solution Dividends of a corporation are declared by its Board of Directors A divedend is a distribution of a portion of a company\'s earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments as shares of stock or other property. Breking Down Dividend The Dividend rate may be quoted in terms of the dollar amount each share receives(Dividend Per Share OR DPS) or It can also be quoted in terms of a percent of the current market price, which is referred to as the Dividend yield. A company\'s net profits can be allocated to Shareholders via a dividend or kept within the company as retained earnings. A Company may also choose to use net profits to repurchase their own shares in the open markets in a share buyback. Dividends and share buy-backs do not change the fundamental value of a company\'s shares. Dividend payments must be approved by the shareholders and may be structured as a one-time special dividend, or as an ongoing cash flow to owners and investors. Mutual Fund and ETF shareholders are often entitled to receive accrued dividends as well. Mutual funds pay out interest and dividend income received from their portfolio holdings as dividends to fund shareholders. In addition, realized capital gains from the portfolio\'s trading activities are generally paid out(Capital gain Distribution) as a year end Dividend. Company that Issue Dividends Start-ups and other high-growth companies such as those in the technology or biotechnology sectors rarely offer dividends because all of their profits are reinvested to help sustain higher- than-average growth and expansion. Larger, established companies tend to issue regular dividends as they seek to maximize shareholder wealth in ways aside from Supernormal Growth. Companies in the following sectors and industries have among the highest historical dividend yields basic materials, Oil & Gases, Bank & FInancial, Healthcare & Phramacetucals. Arguments for Issuing Dividends The Bird-in-hand arguments for dividend policy claims that investors are less certain of receiving future growth and capital gains from the reinvested retained earnings than they are of receiving current (and therefore certain) dividend payments. The main argument is that investors place a higher value on a dollar of current dividends that they are certain to receive than on a dollar of expected capital gains, even if they are theoretically equivalent. In many countries, the income from dividends is treated at a more favorable tax rate than ordinary income. Investors seeking tax-advantaged cash flows may look to dividend-paying stocks in order to take advantage of potentially favorable taxation. The clientele effect suggests especially those investors and owners in high marginal tax brackets will choose dividend-paying stocks. If a company has a long history of past dividend payments, reducing or eliminating the dividend amount may s.

1. Dividends of a corporation are declared by its
Solution
Dividends of a corporation are declared by its Board of Directors
A divedend is a distribution of a portion of a company's earnings, decided by the board of
directors, to a class of its shareholders. Dividends can be issued as cash payments as shares of
stock or other property.
Breking Down Dividend
The Dividend rate may be quoted in terms of the dollar amount each share receives(Dividend Per
Share OR DPS) or It can also be quoted in terms of a percent of the current market price, which
is referred to as the Dividend yield.
A company's net profits can be allocated to Shareholders via a dividend or kept within the
company as retained earnings. A Company may also choose to use net profits to repurchase their
own shares in the open markets in a share buyback. Dividends and share buy-backs do not
change the fundamental value of a company's shares. Dividend payments must be approved by
the shareholders and may be structured as a one-time special dividend, or as an ongoing cash
flow to owners and investors.
Mutual Fund and ETF shareholders are often entitled to receive accrued dividends as well.
Mutual funds pay out interest and dividend income received from their portfolio holdings as
dividends to fund shareholders. In addition, realized capital gains from the portfolio's trading
activities are generally paid out(Capital gain Distribution) as a year end Dividend.
Company that Issue Dividends
Start-ups and other high-growth companies such as those in the technology or biotechnology
sectors rarely offer dividends because all of their profits are reinvested to help sustain higher-
than-average growth and expansion. Larger, established companies tend to issue regular
dividends as they seek to maximize shareholder wealth in ways aside from Supernormal Growth.
Companies in the following sectors and industries have among the highest historical dividend
yields basic materials, Oil & Gases, Bank & FInancial, Healthcare & Phramacetucals.
Arguments for Issuing Dividends
The Bird-in-hand arguments
for dividend policy claims that investors are less certain of receiving future growth and capital
gains from the reinvested retained earnings than they are of receiving current (and therefore
certain) dividend payments. The main argument is that investors place a higher value on a dollar
of current dividends that they are certain to receive than on a dollar of expected capital gains,

2. even if they are theoretically equivalent.
In many countries, the income from dividends is treated at a more favorable tax rate than
ordinary income. Investors seeking tax-advantaged cash flows may look to dividend-paying
stocks in order to take advantage of potentially favorable taxation. The clientele effect
suggests especially those investors and owners in high marginal tax brackets will choose
dividend-paying stocks.
If a company has a long history of past dividend payments, reducing or eliminating the dividend
amount may signal to investors that the company could be in trouble. An unexpected increase in
the dividend rate might be a positive signal to the market.
Dividend Payout Policies
A company that issues dividends may choose the amount to pay out using a number of methods.
Dividend Irrelevance
Economists Merton Miller and Franco Modigliani argued that a company's dividend policy is
irrelevant, and it has no effect on the price of a firm's stock or its cost of capital. Assume, for
example, that you are a stockholder of a firm and you don't like its dividend policy. If the firm's
cash dividend is too big, you can just take the excess cash received and use it to buy more of the
firm's stock. If the cash dividend you received was too small, you can just sell a little bit of your
existing stock in the firm to get the cash flow you want. In either case, the combination of the
value of your investment in the firm and your cash in hand will be exactly the same. When they
conclude that dividends are irrelevant, they mean that investors don't care about the firm's
dividend policy since they can create their own synthetically.
It should be noted that the dividend irrelevance theory holds only in a perfect world with no
taxes, no brokerage costs, and infinitely divisible shares.