Dividend Policy at FPL group Group 6. Dividends Portion of the earnings given back to the shareholders Firms decide Whether to pay at all If ‘yes’ –How.

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Presentation transcript:

Dividend Policy at FPL group Group 6

Dividends Portion of the earnings given back to the shareholders Firms decide Whether to pay at all If ‘yes’ –How much? (payout ratio) –What type? Cash or bonus shares (stock dividend)??

Cash Dividends 3 types Constant dividend per share (Rs / share) – Tata Chemicals Constant payout (% of earnings) – HLL Constant dividend (low) + additional dividend (interim) – Infosys

Pros of Cash Dividends Meets the immediate requirements of the shareholders Less formalities Absolutely tax free money to the shareholder vide Section 56(2) of IT Act Steady cash dividends signify the good health of the company

Cons of Cash Dividends Cash reserves of the company is reduced Companies have to pay 12.5% as distribution tax Dividend fluctuation risk

Bonus shares Paid up capital increases at the cost of reserves Float in the market is enhanced Signifies company’s ability to serve a large shareholder base No change in face value

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