What are the potential consequences for companies whose dividend policies are out of step with their...

What are the potential consequences for companies whose dividend policies are out of step with their financial performance?

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Consequences for the companies whose dividend policies are out of step with their financial performance are as follows-

A. These company will not be able to record sustainable growth because their dividend policies are not in line with their financial performance

B. These companies will be prone to liquidity risk because they will be having inadequate payment of dividend and they can impact the overall liquidity position of the company in the short run.

C. These companies will also not be preferable by the shareholders because they will not be having a stable policy of dividend payment as their performance will be deteriorating as the dividend payments are not in line with the financial performance.

D. There would not be proper synchronisation of strategies according to the life cycle of the business if dividend policies are not adopted by the business adequately.

E. These businesses will not be able to invest properly into their own projects because they will either be paying out more Dividend even if they had higher reinvestment rate so they will be able to not capitalise upon the growth prospective.

F. These company can also employ capital in such projects which are not having a higher reinvestment rate and they will be missing out the payments of dividend to the shareholders because payment of dividend will also mean an increase in share price..

jeff jeffy answered 2 years ago

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What are the potential consequences for companies whose dividend policies are out of step with their...

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