Contents 1. Introduction 2 2. Dividend payout theories 2 3. Change in dividends only because of necessarily 3 4. Clientele Dividend of Shareholders 6 5. The Taxes Liability as an Effect on Dividend Policy 7 6. Conclusion 7 References 8

1. Introduction
Dividend indicates a share profit delivered to shareholders regarding to certain payout ratio. An efficient firm normally saves their finance to wait opportunities from acquisitions which affects earnings realistically. Afterward, the firms can make decision on whether to buy back their shares with their dividend income or to adopt to apply on other activities. However, the decision is depended on many internal and external factors which need to be considered carefully. 2. Dividend payout theories
Up to date, dividend policy is a controversial debate in following components: - Level of dividend payment. - Stability of dividends. - Frequency - Dividend announcement. - Investors’ preference. There are three theories related to three theories to the debate: - Dividends are irrelevant - Bird in the hand. - Tax preference.
Company managers have less interest on cutting dividends and raising dividend since a stable level of dividend payment might be preferred by investors. The reason behind is that dividend change is considered as signals of management’s view of the future. As such, a change (increase or decrease) at time of a dividend changes may be an indicator of changing desire for future EPS, not an expectation of dividends (Mollah & Asma, 2000).
Financial analysts have a huge debate on whether there is an optimal dividend policy. The optimal policy is considered as determinants of the prices in a long-run decision, managers have to sustain at a declared level. Otherwise, an