Dividend policy

Dividend policy

Standards by which a firm determines the amount of money it will pay as dividends.

Dividend Policy

The amount of a dividend that a publicly-traded company decides to pay out to shareholders. The dividend policy may change from time to time. Factors affecting a dividend policy include the company's earnings for the relevant period and its expected performance in the near future. Many companies, especially startups, have a rather stingy dividend policy because they plow back much of their earnings into further development. Established companies, such as blue chips, tend to have relatively liberal dividend policies. However, some research, notably Miller and Modigliani's irrelevance proposition, suggests that a company's dividend policy does not impact its performance in any way. See also: Dividend clientele, Signaling approach (on dividend policy).