Question

Identify the factor affecting dividend decision under which investor considers an increase in dividend as a good needs.

Answer 1

Dividends are corporate earnings that companies pass on to their shareholders. When a company increases its earnings and makes a profit, the board of directors may vote to keep some of it as retained earnings and distribute some of it as dividends to shareholders. The decision regarding how much of a company's earnings should be diverted to shareholders is made in accordance with company's Dividend Policy. Dividend plans can range widely between different companies. In general, Boards of Directors must account for several external and internal factors before declaring a dividend.

External Factors:

Investor Expectations are a primary external factor. Companies cannot control what investors want or expect from their industry.

Businesses are also subject to the varying Cycles of Success that their entire industry goes through. Technology, trends and economic.