What are the factors considered before issuing dividend? Should a company need a dividend policy? Explain in details

Business Dec 25, 2020

What are the factors considered before issuing dividend? Should a company need a dividend policy? Explain in details.

Expert Solution

Factors that must be considered before issuing divided:

Profitability of the business organization.
Capital requirement of the organization.
Expectations of the investors.

Yes, a company needs dividend policy because; it indicates the amount of dividends paid to the investors and the frequency of paying the dividend. Dividend policy also dictates the financial position of the company and may attract new investors. The company who has an effective dividend policy are considered to be stable and it helps in maintaining a goodwill in the market.

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