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How Dividends are relevant and what is the effect of Dividend Policy on the value of the firm

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Once a company makes profit, they must decide on what to do with those profits. They could continue to retain the profits within the company, or they could pay out the profits to the owners of the firm in the form of dividends. Once the company decides on whether to pay dividends, they may establish a somewhat permanent dividend policy, which may in turn impact on investors and perceptions of the company in the financial markets. What they decide depends on the situation of the company now and in the future. It also depends on the preferences of investors and potential investors. Dividends come in several forms. The most common is the regular cash dividend, but sometimes companies pay a dividend in form of stock.
When managers decide on the dividend, their primary concern is to retain its shareholders. So they pay high dividends; but most managers have a conscious or subconscious long-term target payout rate. They donít just look at past earnings performance, but also try to look into the future when they set the payment. Investors are aware of this and they know that a dividend increase is often a sign of optimism on the part of management. The conceptual framework also talks about repatriations of profits. The fact that has to be kept in mind is, if we are to hold companyís investment policy constant, then the dividend policy is sum sort of a trade of dividends being paid in cash and issue or repurchase of common stock.
The answer we need is, should the firms retain whatever earnings is needed for financing the growth and payout the residuals as cash dividends or should they increase the dividends and then issue stocks to makeup for the shortfall of equity capital.
To get to this particular answer, we have tried to analyze, earnings, dividend paid, earnings per share, dividend per share, and the book value of shares, in the five yearís financial statements of Infosys technologies Limited and Berger Paints Limited.
Here we have tried to explain how dividends in these companies have behaved, correlate the various factors affecting dividends, and what made the companies to declare the dividends.

Number of Pages of Project Report: 103
Package Includes: Project Report
Project Format: Document (.doc)

Table of Contents of Project Report:
- Executive Summary
Chapter 1: Introduction
- The Problems
- Objectives of the Study
- Research Methodology
- Proposed Chapter Scheme
Chapter 2: Conceptual Framework
- About business institutions
- About companies and its various acts
- Profits of a company
- About dividends
Chapter 3: Literature Review
Chapter 4: Analysis of Dividend Decisions
- Berger Paints EPS, DPS, and other Financial Data
- Infosys Technologies Ltd, EPS, DPS, and other Financial Data
Chapter 5: Conclusion
- Bibliography
- Annexure

Data till 2007

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