What are the different types of Dividend Policies?

Companies give dividends to shareholders using one of these three policies:

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Residual Dividend Policy

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Stable Dividend Policy

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Hybrid Dividend Policy

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What are the different types of Dividend Policies?

Companies give dividends to shareholders using one of these three policies:

Residual Dividend Policy

Hybrid Dividend Policy

Stable Dividend Policy

Residual Dividend Policy

Under this policy, companies pay dividends from residual earnings after funding all profitable investment opportunities.

It prioritizes reinvestment in the business and aims to maximize shareholder wealth by ensuring every profitable project is funded first.

Stable Dividend Policy

This policy commits to a consistent dividend payout over time and provides shareholders with predictable income

It aims to create investor confidence and loyalty by offering a steady stream of dividends despite the fluctuations in earnings.

Hybrid Dividend Policy

This policy combines the aspects of both residual and stable policies.

It allows companies to distribute a base level of dividends while allocating excess earnings to growth opportunities.

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