The dividend policy of an enterprise, for example a joint-stock company, is a type of distribution of company income when dividends, that is, interest on profits, are distributed among shareholders.
How is the company's dividend policy formed? This policy is formed by the board of directors. Much depends on the general goals of the enterprise, and on the current, current situation in the company. If it was decided to pursue this policy, then the profit of the enterprise is paid in the form of dividends. The principle called the dividend policy of the enterprise, in general, means a uniform distribution of profits in the enterprise.
The dividend policy of the enterprise represents this type of distribution of profits, when the owners remain the winners.
But how do dividends affect the price of securities? That's how. If the amount of dividends is high, then this indicates a successful and correct, in all respects, company policy. It also contributes to the contribution of new investments to the company's budget.
The company's dividend policy is not in its pure form the main source of development of the company or its financing in the short term. The main and main thing is net profit, without dividends. But for a long time in the process of receiving the planned dividends, the company's profit also increases, that is, dividends and become an impressive part of the company's profit.
In the process of enterprise development, future dividends are developing and increasing. Therefore, it is very important to combine two areas of net profit realization.
There are several types of areas of influence of dividends on the rate of securities.
The first theory, called “Modigliani-Miller Theories”, is when the dividend policy of a company does not affect the total value of the company and the profit of shareholders as a whole.
The second theory, entitled "Theory of Dividend Preference." Authorship - D. Gordon and D. Linter.
This theory claims that profits or dividend income are valued higher than other income. Therefore, it is necessary to increase dividends and thus improve the dividend policy of the enterprise.
There are other types of theories. They imply the choice of the type of dividend policy as a whole. There are three options for the formation of the company's dividend policy.
This is a conservative form of profit, when income basically implies the overall development of the company, and dividends seem to be in second place and used as necessary. The conservative type is impressed by two types of dividend policy. This is a residual dividend payout policy and a minimum stable size policy.
The second type of dividend policy is an aggressive type. In this case, the profit of the enterprise is distributed on the distribution of dividends in order to attract large investments. Indeed, large investors are always pleased to work in the field of enterprises with high dividends. The development of the company in this case is already being put on the back burner. An aggressive type, as well as a conservative one, corresponds to two types of dividend payment policies. A policy of a stable level and a policy of constantly increasing dividends.
The third type is a compromise type. The name itself speaks for itself. This is the line between conservative and aggressive species.
All types of dividend policies are actively used by enterprises operating in the modern market. This is primarily due to the fact that ultimately dividends bring new finances, that is, profits. Namely, making a profit is the desired result of all economic activity that companies conduct in the market of goods and services. It is the stimulating effect that they positively affect the economy of any self-respecting company.