The Impact of Dividend Policy on the Stock Prices of Quoted Firms : Current School News

The Impact of Dividend Policy on the Stock Prices of Quoted Firms in Nigeria

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The Impact of Dividend Policy on the Stock Prices of Quoted Firms in Nigeria.


Background of the Study

Dividend policy in general term refers to the percentage of earning that an enterprise can make in its internal financial decisions.

The objectives of choosing a dividend policy should be to maximize the returns made by an enterprise to its shareholders. Dividend as it should be realized are not limited to cash, it may involve some other items of assets.

Soyode points out at dividend encompasses the distribution of any asset or additional stock split dividends and other practices by which earning or asset can be distributes to shareholders.

Dividends ate projects made by a corporation to its shareholders members. It is the portion of corporate profits paid out to stockholders.

When a corporation earns a profit or surplus, that money can be put to two uses; it can either be invested in the business called retained earnings or it can be paid to shareholders as a divided many corporation retain a portion of their earnings and pay the reminder as a dividend for a joint stock, a dividend is allocate as a fixed amount per share.

Therefore, a shareholder receives a dividend in proportion to their shareholding for the joint stock company paying dividend is not an expenses rather, it is the division of an asset among shareholders companies usually pay dividends on a fixed schedule a special dividend to distinguish it from a regular according to members activity, so their dividends are of the consider to be a pre-tax expenses.

Dividends are usually settled on cash basis, as a payment from the store credit (common among retail consumer corporative) and shares in the company (either newly-created shares or existing share brought in the market ).

Further, many public company offer dividend reinvestment plan, which automatically, use the cash dividend to purchase additional share for the shareholders.

The word dividend comes from the Latin word “dividendum” meaning the thing which is to divided among all these various objectives are maximum profit, survival, maximizing returns to shareholders which are form of dividend payment.

However, in order to achieve these objectives, decisions have to be made by the enterprises. In our business organization, there are three broad decision; financing decision, investment decision and dividend decision.

Investment decision and dividend decision, these decisions must be coordinates such that the overall objectives of the enterprises are maximized. Therefore, the subject of concern in this project will be dividend decision and the maximization of the enterprises returns to shareholders.

It is assumed that invest cash in an enterprises for the same reason that any other investment decision is made, in the hope that any result of this investment, he will be able to receive more than the initial among investors, the shareholders look to the enterprises to generate cash for which he can justify his investment.

The most obvious way in which cash will be released to the shareholders, in order to justify his investment so a high dividend payout will reduce the amount of earning to be retained in the enterprise and vice-versa. As said earlier, it is from profit eared that dividend are paid to shareholders and not out of capital of the company.

So in case where there are no profits, dividend cannot be paid according to Pandey, dividend paid to shareholders represent a distribution of earning that cannot be profitably reinvested by the company.


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