Question

Explain the following factor affecting the dividend decision of a company:

Shareholders' preference 

Answer 1

Shareholder preferences and expectations affect a company's dividend decision. Shareholders, including income-oriented investors and retirees, may value dividend income for passive income and capital preservation. Other owners, including growth-oriented or institutional investors, may prioritize capital appreciation and reinvestment to maximize long-term returns. Management examines shareholder preferences, communication channels, and feedback systems to balance dividend payouts and retained earnings with interests and expectations.