Page 6 - PowerPoint Presentation

THE DIVIDEND DECISION

Overview

• A cash dividend is usually paid out of ‘free cash flow’

and thus management will not be able to use these

funds to invest in new projects; they may have to raise

capital elsewhere.

• Since shareholders’ return on investment comprises

both capital gain and dividends, the investors should be

concerned with the total return.

• This will be in line with management’s focus to

maximise shareholders’ wealth. (You should know that

running a business on a sustainable basis also requires

focus on other things – including people and the

planet.)

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