. The dividend debate is inconclusive and still on-going in the corporate world. In your view,...

. The dividend debate is inconclusive and still on-going in the corporate world. In your view, briefly

discuss some real world factors that may support the payment of high and low dividends.

Expert Solution

The payment of dividend is always subject to debate and it must be paid after consideration of these real world factors such as-

A. Liquidity in the overall economy-if there is a high level of liquidity in the overall economy, payment of dividend is a good option because there would be adequate cash in hand but if there is low liquidity in the overall economy, the payment of dividend is not a good option

B. Rate of return on investment-is the rate of return on reinvestment is high the company should not be focused much on paying on the dividend and it should always be focused on reinvesting its profits while if the rate of return on investment is quite lower than the company should pay the dividend instead.

C. Risk associated with the company is lower in nature then the company should always pay the dividend, if risk is high for the company then it should focus on saving its reserves.

D. if dividend is leading to an increase in the share price of the company, it should be paying out on the dividend and maintain the uniformity else,if the payment of dividend is not having a significant repercussion on the share price of the overall company, then the company should decide against payment of dividend.

E.if it is a growth company then dividend should not be paid and if it is a mature company then it should be focusing on paying out dividend by distribution of it's cash.

jeff jeffy answered 1 year ago

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