Dividend Factors

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Include legal restrictions, contractual and internal growth prospects of the company, the considerations and, finally, market considerations.

Legal restrictions. In most countries prohibit corporations which want to pay part of the legal capital in the form of dividends., Such legal capital measured by the book value of common stock.

Contractual restrictions. Often, the capital of the company to pay cash dividends is restricted by certain provisions in a loan agreement.

Internal restrictions. The company's ability to distribute dividends is often constrained by the amount of excess cash available.

Growth prospects. The financial requirements of the business organization of direct relevance to the degree of expansion or acquisition of assets projected.

Owners considerations. When establishing a dividend policy, the prime objective of the company should be to maximize the benefit of the owners.

Market considerations. Because the benefit of the owners of a company is reflected in the price of the stock market, you should know the likely market response to certain types of policies to formulate an appropriate dividend policy.


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