Page 192 - 5.2 i. Manac Finance ITC Summarised Notes

THE DIVIDEND DECISION

Dividend policy in practice and dividend stability

• Directors tend to believe that a stable dividend policy is in the interest
of shareholders.

• As a result, they will aim to maintain a constant or gradually growing

dividend through time, regardless of earnings’ fluctuations.

• In order to achieve dividend stability, companies may pay low regular

dividends that can easily be maintained. On top of this, they will then
make extra dividend payments in good years. This would be

designated as a special dividend, with no assurance that it will be

repeated (thereby creating no expectations).

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