Dividend policy

Policy considers investment opportunities, available cash, financing access, legal restrictions, shareholder expectations, stability and signalling effects. Profit alone does not establish cash or lawful distribution capacity. A residual approach funds suitable investment first and distributes the remainder; a stable-dividend approach places more emphasis on predictability. Perfect-market dividend-irrelevance theory depends on restrictive assumptions and does not mean real-world distributions have no consequences. Alternatives include scrip dividends and buybacks, each with distinct effects. Evaluate policy in the business's financing and stakeholder context.