Question

Which of the following factors affects the dividend decision.

विकल्प

• Amount of Earning

• Stable Earnings

• Stable Dividends

• All of the above

Answer 1

All of the above

Explanation -

The elements that influence dividend decisions are listed below.

1. Amount of Earning: A firm pays dividend out of its current and the past earnings. This implies that earnings play a key role in the dividend decision. A company having higher earnings will be in a position to pay a higher amount of dividend to its shareholders. In contr_ast to this, a company having low or limited earnings would distribute low dividends.
2. Stable Earnings: When a company has a stable and a smooth earning; they are in a position to. distribute higher dividend as compared to the companies who have an unstable earning. In other words, a company having consistent and stable earnings can distribute higher amount of dividends.
3. Stable Dividends: Companies generally follow the practice of stabilising their dividends. They try to avoid frequent fluctuations in dividend per share and opt for increasing (or decreasing) the value only when there is a consistent rise (or fall) in the earnings of the company.
4. Growth Prospects: Companies aiming for a higher growth level or expiration of operations retain a higher portion of the earnings with itself for re-investment. Thus, dividend of such a company is smaller as compared to the companies with lower growth opportunities.