Stability of Dividend

There may be three types of dividend policy

Strict or Conservative dividend Policy which envisages the retention of profits on the cost of dividend pay-out. It helps in strengthening the financial position of the company; (2) Lenient Dividend Policy which views the payment of dividend at the maximum rate possible taking in view the current earing of the company. Under such policy company retains the minimum possible earnings; (3) Stable Dividend Policy suggests a mid-way of the above two views. Under this policy, stable or almost stable rate of dividend is maintained. Company maintains reserves in the years of prosperity and uses them in paying dividend in lean year. If company follows stable dividend policy, the market price of tis shares shall be higher. There are reasons why investors prefer stable dividend policy. Main reasons are:- 1. Confidence Among Shareholders. 2. Income Conscious Investors. 3. Stability in Market Price of Shares. 4. Encouragement to Institutional Investors.   for details visit- http://www.mbachannel.blogspot.in/2014/05/stability-of-dividend.html

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