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.
![]() |
Tom J.
Jackson, MI
|
|
Many thanks to your writers and customer service representatives for helping me get through a very difficult time in my college career. I needed writing assistance and your crew came through for me, big time! My papers were written impeccably. Thanks so much! |
![]() |
Louise O.
Oakland, CA.
|
|
The A+ that I got on the paper that I ordered from you, helped boost my grade up an entire letter grade! Thanks, EssaysEmpire.com! |
![]() |
Doreen A.
Malibu, CA
|
|
Due to a family emergency, I was unable to complete a very important paper. Thanks to EssaysEmpire.com, I was able to hand in a well written paper and not sacrifice my grade. I will be forever grateful to your writing service for providing such outstanding work. Thank you so much. |
![]() |
Delaine A.
Taos, NM
|
|
I had a question about the pricing. As I glanced through the EssaysEmpire.com website, I noticed that they were offering a lot for not all that much money. I spoke to a customer service person and she told me that the prices I saw on the website were accurate. Therefore, I ordered my first paper, not expecting all that much. What I got back was a brilliantly written essay that earned an A+ mark! Wow! I am impressed! |
![]() |
George Sparlin
Nashville, TN
|
|
You guys are fabulous to offer such amazing guarantees for your work. I hired you for my last two papers because there was no risk involved. That was a pretty attractive option, if you ask me. Of course, I didnРІР‚в„ўt have to cash in on any kind of guarantee, because the work was perfect! Go figure. Thank you, EssaysEmpire.com. |
![]() |
Carolyn C.
Norman, OK
|
|
My paper was completed 3 days earlier than I had requested it. It needed no revisions and was much better than I had imagined. Thanks, EssaysEmpire.com! |
![]() |
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. |
![]() |
Stephanie K.
Stowe, VT
|
|
Dear Sirs: Just a quick note to let you know that I appreciate your working on my paper so quickly. I did get it in time to turn it in for the deadline, even though I hadn’t given you much notice. I made a very good grade on it and was much relieved. Thanks again. You rock. |
![]() |
Marcella M.
Lexington, KY
|
|
Dear EssaysEmpire.com, I am very happy with the work that your writers did for me. I was impressed by the plagiarism report, too. Thanks for everything! |
![]() |
Mark M.
Cambridge, MA
|
|
The paper I ordered from EssaysEmpire.com is incomparable! Thanks for doing such stellar work. I have recommended your services to a few other folks who plan to try you out soon. EssaysEmpire.com gets my vote for best writing service every time. |
![]() |
Royce B.
Dallas, TX
|
|
It is so refreshing to work with a writing service as professional as EssaysEmpire.com. Everything from your website, to your customer service workers to the writing itself, is top rate. I recommend you highly to anyone who will listen. |
![]() |
Melissa C.
Rochester, NY
|
|
I am completely satisfied with the paper I purchased from your company. I only wish I had known about you last year when I took an F grade for not being able to complete a paper on time. The work you did was marvelous. Whenever I find myself falling behind in my school work, I will be sure to pass along some of my more difficult written assignments to you |
![]() |
Steve C.
Marion, NE
|
|
Thank you so much! I was assigned a paper that I found impossible to write. I did the reading. I did the research. However, regardless of my weak attempts, I could not formulate a cogent paper. I needed help, and EssaysEmpire.com’s writers were there for me. Customer service even arranged for me to speak with the person who was working on my paper personally. I had a lot of concerns, because my professor was very picky. However, EssaysEmpire.com was able to handle the order with no problem |
![]() |
Cleo P.
Oakland, CA
|
|
I submitted my order as a ‘rush order’. I only had 2 days to get my paper finished and I just felt like I was sinking. I didn’t understand the material I was writing about, and I didn’t know what I was going to do. My friend recommended EssaysEmpire.com. I had very little lost by attempting to use this writing service, so I did. It was an excellent move on my part, because, not only was my paper finished on time. It was also excellently written. I will always be grateful to my friend for recommending your service. It is wonderful. |
![]() |
Bruce R.
Tulsa, OK
|
|
Thanks for everything. You guys know how to write so well! I will call on you again in the future. |
![]() |
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! |
![]() |
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. |
![]() |
Mike G.
Rochester, NY
|
|
Your writing service is different from other writing services. Yours is the only one I have ever dealt with that I can truthfully say is legitimate. The staff is very professional. The writers are the best in the business. I am pleased with the results of my last three orders and plan to return for more soon. |
![]() |
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. |