1. CORE JAVA
Dividend
By- Sonali
BBA/13/913
December 29, 2015
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Dividend| CONFIDENTIAL 2015

2. Meaning
 The term dividend refers to that part of profits of a company
which is distributed by the company among its shareholders.
 It is the reward of the shareholders for investments made by
them in the shares of the company.
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December 29, 2015Dividend| CONFIDENTIAL 2015

3. Determination of Dividend
 Checking the levels of profits.
 Determination of rate of dividend.
 Verification of liquid assets.
 Forecasting future needs.
 Adequacy of reserves.
 In case of surplus profits.
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December 29, 2015Dividend| CONFIDENTIAL 2015

4. Introduction to Dividend Policy
 The dividend policy of a firm determines what proportion of
earnings is paid to shareholders by way of dividends and what
proportion is ploughed back in the firm for reinvestment
purposes. If a firm’s capital budgeting decision is independent
of its dividend policy, a higher dividend payment will call for a
greater dependence on external financing. Thus, the dividend
policy has a bearing on the choice of financing. On the other
hand, firm’s capital budgeting decision is dependent on its
dividend decision; a higher dividend payment will cause
shrinkage of its capital budget and vice versa. In such case, the
dividend policy has a bearing on the capital budgeting decision.
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December 29, 2015Dividend| CONFIDENTIAL 2015

5. Meaning of Dividend Policy
Dividend policy refers to the policy that the management
formulates in regard to earnings for distribution as dividend
among shareholders. It is not merely concerned with dividends
to be paid in one year, but is concerned with the continuous
course of action to be followed over a period of several years.
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6. Goals of Dividend Policy
 Dividend policy should be analysed in terms of its effect on the value of the
company
 Investment by the company in new profitable opportunities creates value
and when a company foregoes an attractive investment, shareholders incur
an opportunity loss
 Dividend, investment and financing decisions are interdependent.
 Dividend decisions should not be treated as a short-run residual decision
 A workable compromise is to treat dividends as a long-run residual to avoid
undesirable variations in payout. This needs financial planning over a fairly
long time horizon
 Dividend policy should be communicated clearly to investors who may then
take their decisions in terms of their own preferences and needs
 Frequent changes in dividends should be avoided
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December 29, 2015Dividend| CONFIDENTIAL 2015

7. Payment of Dividend
 • Statutory Provisions:
 Payment after deducting depreciation
 Transfer to reserve: amount transferred to reserves cannot exceed 10%
of the profits, in any situation, unless it is specially allowed by the
central government.
 Payment of dividend only in cash
 No payment of dividend out of capital
 Dividend in proportion to paid-up capital
 Payment of dividend to registered shareholders
 Payment of dividend within 30 days
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December 29, 2015Dividend| CONFIDENTIAL 2015

8. Provision of Table “A”
 The company can declare dividends only in a general meeting
 Rate of dividend should not exceed the rate recommended by the BOD
 If the directors deem it fit, the BOD may declare interim dividends,
during the year
 Before declaring dividends, the directors of the company may transfer
a part of the profits to reserves.
 This amount can be invested outside company.
 Dividend should be paid in proportion to paid-up capital
 No notice should be sent of dividend declared
 If the amount remains payable on account of dividend than the
company shall not pay any interest on that amount
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December 29, 2015Dividend| CONFIDENTIAL 2015

9. Interim Dividend
 The dividend which is declared by the directors during the
continuance of the financial year is known as interim dividend.
 The directors of the company are entitled to declare interim
dividends provided there are sufficient profits in the company.
After the declaration of interim dividend by the directors, the
dividend which is finally approved by the company in the AGM
is Called the final dividend
 Statutory provisions regarding Interim dividend
 The BOD may declare the I-Dividend and its amount shall be
deposited in a separate bank account within five days from the
date of declaration of such dividend.
 This deposited amount should be used only for the payment of I
–Dividend
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December 29, 2015Dividend| CONFIDENTIAL 2015

10. CORE JAVAAny Question
December 29, 2015
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Dividend| CONFIDENTIAL 2015