Dividend policy is a company's approach to distributing a portion of its earnings to shareholders, including the frequency and amount of dividend payments.

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Why is dividend policy important?

A company's dividend policy is important because it communicates its financial health, growth prospects, and commitment to shareholder returns, influencing investor confidence and stock valuation.

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An easy way to understand dividend policy is:

To think of it as a company's plan for how often and how much they will pay out in dividends to shareholders, based on their financial performance and goals.

How The 3 Types Work

Stable Dividend Policy: Under this policy, companies pay a fixed dividend per share, regardless of fluctuations in earnings. This provides shareholders with a predictable income stream and signals the company's confidence in its long-term prospects. However, if the company's earnings decline significantly, it may need to reduce or suspend the dividend.

Constant Payout Ratio Policy: With this policy, companies pay a fixed percentage of their earnings as dividends. The dividend amount fluctuates with the company's earnings, allowing shareholders to benefit from the company's growth. However, during periods of low or negative earnings, the dividend may be reduced or eliminated.

Residual Dividend Policy: Under this policy, companies prioritize financing their investment projects with retained earnings. Dividends are paid only from the remaining funds after all suitable investment opportunities have been exhausted. This policy favors company growth over providing a steady income to shareholders, and dividend payments can be irregular or non-existent.

Our dividend policy has been designed to balance between retaining earnings to finance operations and rewarding shareholders. This strategic approach supports our expansion plans while ensuring shareholders benefit from our growth, thus maintaining their long-term support and investment.