Question

Analyse the ANZ's dividend policy. Should the company follow a progressive dividend policy? Critically evaluate factors that are affecting corporate dividend policy and how your company's dividend policy may have influenced its capital structure and share price.

Answer 1

Australia and New Zealand banking group is distributing annual dividend of .$50 per share as dividend in each year and it is always following up with a constant Dividend policy and the dividend payout ratio has been 34.34%.

Company should not be following up with progressive dividend because progressive dividend will not let the company decrease the overall dividend when the earning of the company's decreases and during such a turbulent times of coronavirus crisis the earning of the company is expected to decrease heavily and it would mean that the company should be trying to reduce the dividend and it is not adaptable as per progressive Dividend policy.

Corporate Dividend policy is a policy about distribution of dividend to the shareholders which will be in synchronisation with the goals of both the shareholders and the company because when the profits are made by the company the dividend should be distributed to the shareholders as they are the ultimate owners of the company.

Companies Dividend policy will be influencing the capital structure and the share price because when there would be a higher proportion of equity capital in the overall capital structure of the company, It will mean that the company will be having a higher payment as dividend and it will be leading to higher dividend payout ratio and when it will be formulated in line with the share price generally, payment of dividend will be leading to increase in the share price because it is a positive sign that company is making profit and distributing dividend.