Dividend policy is the decision making process concerned with paying cash dividends to shareholders.In the following presentation, I've listed some of the leading concepts and theories of the Dividend policy.

1. DIVIDEND POLICY
concerned with paying cash dividends to shareholders

2. Dividend policy is the decision making
process concerned with paying cash
dividends to shareholders. Usually
when a company has excess cash the
management is expected to distribute
the surplus cash in the form of cash
dividends. Alternatively, the company
can also decide to repurchase its stock
through a share buyback program.
A company may choose to pay its due
dividends in the present or paying an
increased dividend at a later stage.
Companies may also opt to pay stock
dividends to its shareholders rather
than cash dividends which would lead
to higher capital gains but at the
expense of restricted liquidity.

3. Since the valuation of company's shares depends greatly on the
dividend expectations of its shareholders hence a company’s dividend
policy has a significant bearing on its financial situation. Finance theory
states that management should return some or all of the excess cash to
shareholders as dividends in the event that returns are higher than the
hurdle rate and excess cash is not required.

4. The
Company
Growth
While this is the general
theory functional in most
circumstances, in the case of
“growth stock”, the growth of
the company is prioritized and
so the majority of the
dividend is retained by the
management for use in
developing the company. This
is done with the view that
development of the company
and its operations would
eventually lead to
proportionately higher
dividends in the future.

5. Some financial theories have supported the
paying of financial dividends from excess
cash while others have proposed that
dividend payout whether it is in the form of
cash or stock. Financial theories which
support dividend policies are Walter’s
Model, Gordon’s Model, Capital structure
substitution theory and dividends. Financial
theories which reject the relevance of
dividend policy are Residual theory on
Dividends, Modigliani-Miller Theorem.
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DIVIDEND POLICY
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