“The dividend decision is unimportant to the wellbeing of a company.” Discuss

Stock is a product of socialization production, and the earliest stock can be tracked back to 17th century. In terms of stock, dividend decision is an important concept, which can not be ignored. Dividend decision is defined as ‘Determines the division of earnings between payments to shareholders and retained earnings.’ ( http://finance.mapsofworld.com/corporate-finance/investment-decision/dividend.html ) Dividend decision is also called dividend policy, which has always been disputed. However, no matter how it is debated, dividend policy is very important to the healthy and orderly operation of a company. In the fist place,this essay will discuss the effect of different dividend policies on companies running, secondly indicate dividend decision should be changed to be fit for different growth periods and various investment opportunities, thirdly investigate how the refunding ability and cost of a company are affected by dividend policies, after that this paper will talks about the relationship between dividend decision and the structures of control rights to an enterprise, finally this article will evaluate the M&M theory and further prove that the importance of dividend policies for a corporation.

There are diverse types of dividend policy, and each policy has different influence on corporations. Generally,Constant Payout Ratio (CPR), Constant Dollar Dividend Policy(CD), and Regular with Extras (RE) are three mainstream dividend policies. ( http://finance.mapsofworld.com/dividend/policy.html )Taking CPR as example, dividend takes stable proportion of corporation’s profit in this policy, and this policy usually will be enforced for a long time; asTestdfddfdfdf fggf