Dividend Policy and Stock Prices
| ← Business Environment Assignment | Outsourcing → |
Dividends are the proportion of a company’s profits that is distributed among the shareholders. Dividend policy is a term referring to the decision as to which magnitude of the proportion of the earnings is to be paid out to the shareholders of a company. It is an integral part of the operations of a firm, portraying its economic stability and has important implications on its share prices.
Purpose of a Dividend Policy
The dividend policy of a company can serve as the basis for financing and investment besides creating an admirable corporate image and influencing the share prices of the company. A firm may decide to alter its dividend payout ratio in order to retain profits to raise extra capital to finance expansion. The corporate image comes in due the fact that a high dividend ratio signals investors, creating confidence on the financial status of the company. It is directed towards pulling investors to a company- the so called “clientele effect”, and has effect on the market value of the company’s stock.
Factors influencing the direction of a Dividend Policy
One of either two directions can be taken with regard to a company dividend policy; a high or a low payout to the shareholders. This is influenced by several factors but the main ones are: the need for additional capital, government policies/legal requirements and the policy of control. Additional capital may be required to meet increasing working capital requirements or for expansion purposes. A company lacking many alternatives of funding will need to declare low rates of dividends and retain big portion of the profits.
The government of the day determines the economic policies existing in terms of fiscal, labor and control policies. The taxation policy pursued by the government also affects the earning capacity of a given company. This in turn has a direct effect on the profits accrued by the company and as such the dividend payout to the shareholders.
Another important factor affecting the direction of dividend policy in a company is its policy of control. In case the directors of the company desire to keep control of the company to themselves, they will have low rates of dividend payout to discourage new shareholders. When the issue of control and power in a company are not of importance the company may pursue high dividend rates.
Effect of the Dividend Policy on Stock Prices
A company reputed to have a history of a high dividend payout rate attracts more potential investors interested in buying the company’s stocks rather than selling in comparison to one with a low dividend rate. In accordance with the laws of demand and supply, the share prices tend to rise with time.
Recommendations
Axetem International, Inc. is hoping to develop a dividend policy that will attract potential investors in order to raise capital to finance major expansion. In essence, we are trying to develop a strong “clientele effect”. This is achievable through influencing the investors to hold onto stocks by making a dividend policy that suits their needs. Their confidence needs to be built so that they prefer the certainty of these dividends over prospective capital gains. A considerably high dividend rate is therefore recommended so as to attract potential investors, and most importantly, the company needs to assure them that this dividend policy is stable enough to last into the future.
Conclusion
The dividend policy of a company is its decision regarding the percentage of net profits to be distributed to its shareholders. Its main purpose is to signal potential investors in the process developing clientele effect, besides serving as a means to raise capital for the company. Several factors are considered when determining the payout ratio, with the most important ones being the need for capital, government policy and the company’s control policy. The dividend policy pursued by a company has an important bearing on its stock values, with a high payout increasing the stock value and a low payout having the opposite effect. Since Axetem International, Inc. seeks to expand, the best approach to dividend policy will be a considerably high payout coupled with assurance that this is sustainable into the future with the aim of attracting clientele effect.
|
Bruce B.
Purcell, OK
|
|
|
I had a hard time articulating what my professor wanted, so I was able to speak straight to my writer. After I had explained a little bit, I could tell he understood everything. He then took the ball and ran with it, so to speak. He wrote my paper in two days and it was the picture of perfection! I am very grateful that he knew what to do and how to do it so perfectly. |
||
|
Sarah H.
Brooklyn, NY
|
|
|
As always, I can count on EssaysEmpire.com to never let me down. I had to place an emergency order and was worried that I had not given the writer enough time to do a good job. I was wrong. They did a tremendous job! Thanks ever so much! |
||
|
Nancy T.
Little Rock, AR
|
|
|
The quality of the work produced by your professional writers is second to none. No wonder you have the reputation for being the best writing service online! You certainly met up to all of my expectations! You’re the best, for sure. |
||
|
Benjamin P.
Beaumont, TX
|
|
|
Thank you for your diligence! Your writers got it right down to the last word! I appreciate how closely they paid attention. |
||
|
Tommy Davids
Singapore, CH
|
|
| EssaysEmpire.com knows how to do the things that it takes to instill confidence in their customers. They can be counted on every time, to deliver high quality service and high quality writing at prices that we can afford. I would never use any other writing company. “If it ain’t broke, don’t fix it.” It ain’t broke! | ||
|
Hillary M.
Santa Cruz, CA
|
|
|
I received 100 points out of a possible 100 for the paper that you wrote for me. |
||
|
Barry M.
Seattle, WA.
|
|
|
BRAVO! EssaysEmpire.com has done it again. I have just received another A+ for an EssaysEmpire.com paper! Thanks!Thanks! |
||
|
John G.
Erie, PA
|
|
|
Thanks goes out to the writers who presented me with the best paper I have ever turned in. My professor was so impressed with it that he took excerpts from it to put in his class handouts on how to write the perfect paper. EssaysEmpire.com, you made me one proud student today! |
||
|
Langley R.
Los Angeles, CA
|
|
|
One of the things that I appreciate most about EssaysEmpire.com, is that they don’t resell your paper. Only you own it, if you hire them to write something. Other writing services that I have used, just circulate the same paper over and over, and if you get caught turning one in, too bad. You are expelled. EssaysEmpire.com will even give you a plagiarism report after they run it through their anti-plagiarism check. Such details set EssaysEmpire.com above the rest. |
||
|
Thomas C.
Louisville, KY
|
|
|
I loved the paper that your writers helped me with. They wrote from a very interesting perspective that I had never even considered. My teacher was happy with the work, and so was I. Thank you very much. |
||
|
James C.
New Orleans, LA
|
|
|
I am required to do more writing this semester that I possibly have time for. Right after class, I have to go straight to my job. It’s a good thing I have EssaysEmpire.com to help me out with the writing. You guys always do such excellent work. Thanks! |
||
|
Grace T.
Purcell, OK
|
|
|
Thank you for assuring that only the best writers work for you. It doesn’t matter which writer has been assigned to my projects since I started using your services. Every time I get a paper written, it is perfect. |
||
|
Kathy M.
Las Cruces, NM
|
|
|
To EssaysEmpire.com: Thank you for my outstanding paper. When I read it, I knew that I would get an A+ on it. Also, thanks for adding all of the pertinent details that I asked you to customize. You did a brilliant job. Just brilliant. |
||
|
Kris K.
San Francisco, CA
|
|
|
I would like to say thanks to writer #48376 for doing such an astonishing job on my paper. I really gave him very little to go on. Still, he was able to do the research and come up with a champion paper for me. I am speechless. I didn’t expect anything nearly this good. |
||
|
Sanjaya K.
Calcutta, INDIA
|
|
|
I am fully satisfied with my research paper. It cannot have been easy for your writers to compose! The topic is called, "PARALLEL ALGORITHM FOR MULTI-DIMENSIONAL MATRIX MULTIPLICATION OPERATIONS REPRESENTATION USING KARNAUGH MAP”. That is a very difficult topic! However, your writers developed an algorithm, included a diagram and a graph and related multi-dimensional matrix multiplication perfectly. I am thrilled with the work I received and will be using your company again in the near future. Thank you for all of your hard work on this project. I love it! |
||
|
Morgan W.
Eugene, OR
|
|
|
I don’t see how anyone could write a paper about something as boring as the psychology of the two year old, could make it sound so interesting, but your writers managed to pull it off. Thank you for putting forth such a concerted effort to do a good job. I really appreciate it. I will use your service again |
||
|
Cleo C.
Wichita, KS
|
|
|
To the writers at EssaysEmpire.com: Next week, I will be graduating with a degree in clinical psychology. Over the course of my college years, I have had to turn to you for help many times. Each and every time, you produced some of the highest quality writing my professors had ever seen. Because of you, I was able to keep a high grade point average and get into an excellent grad school. There are simply no words adequate enough to fully express my appreciation, so I’ll simply say, “thank you” and let it go at that. Please know that you are appreciated. |
||
|
Joyce T.
New Orleans, LA
|
|
|
I was trying to choose between EssaysEmpire.com and another online writing service and I didn’t know which one to pick. Then, I began to read reviews. I didn’t read even one thing negative about EssaysEmpire.com, and the other site was fraught with complaints. I went with EssaysEmpire.com, and it turned out that all the good things I had read about the service were true. My paper was fully guaranteed, but it was A-1 quality. The customer service people were great. The prices were right. Now, I am a devoted fan. When I need help with my writing, I go straight to EssaysEmpire.com! |
||
|
Ohjasi O.
Tokyo, JP
|
|
|
The essay that your writers turned out for me far exceeded what I was expecting. It even came with a plagiarism report to prove that it was original. The customer service center was the picture of perfection, too. I loved everything about using EssaysEmpire.com and plan to use your services again. You are one class act! |
||
|
Maddie P.
Seattle, WA
|
|
|
The EssaysEmpire.com website is so great! There are no mysteries to be solved. They give you the full layout about what they have to offer and how much it costs. No surprises. I had a couple of questions about the different options and their customer service rep was so friendly! She answered all my questions. I ordered my first paper and it was so well written that I got an A+ on it! Thank you, EssaysEmpire.com! |
||
