How to determine the most appropriate dividend policy has become one of the hottest topics in recent years as dividend decisions continue to have a significant impact on both investment and finance decisions (company’s performance overall), affecting financial managers considerations when deciding how much earnings to reinvest and how much to be paid to shareholders (Watson and Head, 2010). There are already many theories either supporting or criticising the impact of dividend decisions on a firm’s value. Litner (1956) indicated that dividends are paid by mature companies who have positive earnings instead of smaller firms and managers always target a long-term dividend payout that can be sustained. This essay will critically evaluate dividend policies relating to appropriate theories by using Vodafone as a primary example; and discuss the possible reasons why the company announced a £1.5bn share buyback program in 2012.
Vodafone was the first UK mobile company in 1982 and is now standing at the maturity stage of its business life cycle as one of the worlds’ largest mobile companies, operating across 30 countries (Vodafone’s annual report, 2013). Based on Vodafone’s annual reports from 2009 until 2013, it clearly shows that Vodafone’s dividend payout steadily increased. This signals that Vodafone might have more free cash flow in the past five years. Due to increased earnings, shareholders would like to see Vodafone increasing its dividends payments to reflect its’ stronger financial performance. Furthermore the fundamental purpose of an organisation is to maximise shareholder value, therefore receiving more income gives an opportunity for management to give extra rewards for their investments and keep them happy. Paying out ...
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...pp. 535 – 740. [Online] Available at: https://uhvpn.herts.ac.uk/S0304405X07002334/,DanaInfo=ac.els-cdn.com+1-s2.0-S0304405X07002334-main.pdf?_tid=2a7a4a6c-a15a-11e3-83e8-00000aab0f6c&acdnat=1393689618_b9732d9e37e08c40d82a3ccffbb26441 [Assessed: 27 February, 2014].
The Telegraph (2013) Vodafone profits collapse as company denies shareholders Verizon dividend [Online] Available at: http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/telecoms/10070123/Vodafone-profits-collapse-as-company-denies-shareholders-Verizon-dividend.html [Accessed: 2 March, 2014].
Vodafone (2013) Annual Report 2013 [online] Available at: http://www.vodafone.com/content/annualreport/annual_report13/downloads/vodafone_annual_report_2013.pdf [Assessed: 25 February, 2014].
Watson, D. & Head, A. (2010) Corporate Finance: Principles & Practise. 5th edn. Harlow: Prentice Hall.
Every action or proposal needs to balance equity and efficiency needs in order to deliver optimal dividends to its targeted audience. Given the fact that resources are relatively scarce compared to the innumerable needs, businessmen, economists, administrators among other leaders reckon that every proposals needs the equity-efficiency balance in order for set goals and objectives to be achieved. This paper seeks to describe the role of equity and efficiency trade off in proposals.
„I As the company is reaching the maturity stage, dividend payout is another option instead of company growth only
A business might generate sufficient cash inflows if it is profitable. The directors of the company need to make a decision regarding paying dividends. The payout ratio along with the amount that needs to be paid must be specific if the management of the organization decides for paying dividends. Management of the company are directed by the principle of wealth maximization of shareholders When it comes to deciding whether to pay dividend or not, the organization might not pay dividends, if the profit can be capitalized somewhere else for generating future cash flows (Kaplan Financial,
In mid September 2005, Ashley Swenson, the chief financial officer of this large CAD/CAM equipment manufacturer must decide whether to pay out dividends to the firm¡¦s shareholders or repurchase stock. If Swenson chooses to pay out dividends, she must also decide on the magnitude of the payout. A subsidiary question is whether the firm should embark on a campaign of corporate-image advertising and change its corporate name to reflect its new outlook. The case serves a review of the many practical aspects of the dividend and share buyback decisions, including(1) signaling effects, (2) clientele effects, and (3) finance and investment implications of increasing dividend payout and share repurchase decisions.
Dividends represent one of the methods in which firms divided their profit generated by companies' activity. Dividends are usually a cash payment, which are paid on a quarterly or an annual. It is depends on the company dividend policy and, currently, there are many discussions about whether it is necessary for organizations to pay dividends or it is better not to pay them. Depending on the aims of the firm and current position in the market, a company may take one or another decision. This work will deal with questions of why companies pay dividends and why it is very important.
D’Amato, E. (2010). Australian Shareholders’ Association: Standing Up for shareholders – The top 15 financial ratios. Australia: Lincoln Indicators Pty Ltd.
In two decades, Vodafone became the telecommunications leader in Global Systems for Mobile networks (www.associatedcontent.com). Vodafone provides innovative and cutting edge telecommunications services on the largest wireless network on earth. In this article, I will discuss how Vodafone was started and the growth of one of the world's largest company.
Howells, Peter., Bain, Keith 2000, Financial Markets and Institutions, 3rd edn, Henry King Ltd., Great Britain.
Total Shareholder Return (TSR) is a critical key performance indicator (KPI) to measure portfolio performance as well as evaluate investment decision in firms which forms the crux of the research presented in this paper. TSR is a compounded and annualised measure including dividends paid to shareholders by Temasek however, it does not include capital injections by shareholders. Temasek is a long term investor and tracks its TSR over various time periods. Following gives Temasek’s portfolio performance
Holders of these shares would hope to share in the prosperity of the company by way of increased dividends
Dividend can be defined as a portion of company profit that is paid out by the corporation to their shareholders as a reward for investing in the corporation meanwhile dividend policy refers to a company’s policy which determines the amount of dividend payments and the amounts of retained earnings for reinvesting in new projects. This policy is related to dividing the firm’s earning between payment to shareholders and reinvestment in new opportunities and helps the firms to know that how they can control the agency costs by handling the Dividend policy.
Maximising profit is perhaps the main objective of every business. Higher profit means higher dividends, higher salaries and more money to spend on research and development and as a result expand the business (Audrey and Liao 2013, 277). However, in reality companies need to focus on other objectives in order for the business to survive. As stated by Suciu and Fisher (2014, 14) “ good profits are not enough anymore to maintain a high brand reputation”. In fact, businesses that has responsibility concerning their environment and community proven to create both good brand reputation and profitable business (Suciu and Fisher 2014, 14).
Dividend policy determines the ultimate distribution of a company’s earnings between retention and cash dividend payments to its shareholders.
Block, S. B., & Hirt, G. A. (2005). Foundations of financial management. (11th ed.). New York: McGraw-Hill.
Changes in dividend provide a signal to the market regarding the expected future performance of the company’