Neutral Approach at Dividend Policy Modeling

Neutral Approach at Dividend Policy Modeling

Sergey Krylov
Copyright: © 2025 |Pages: 15
DOI: 10.4018/978-1-6684-7366-5.ch008
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The article treats a concept of the formalized modeling of the dividend policy scores and company marketing performance scores derived (stock market position) within neutral dividend policy implementation approach conditions. It has been stated that a formalized approach of the dividend policy implementation presumes a construction of the basic relevant scores models characterizing the company dividend policy and its marketing performance. The formalized models of the scores mentioned are applicable for a forecast-analytical scores evaluation and their variances as well as by estimating an impact of the model-defining factors exercised by the appropriate factoring analysis method within the neutral dividend policy implementation approach conditions. The conclusion is drawn that the formalized models of the dividend policy scores and company marketing performance scores derived, having been developed, are an effective instrument for their forecasting and analysis so that proactive decisions to manage the company dividend policy implementation within neutral approach conditions can be made.
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In present-day environment a selection of the dividend policy as a complex of decisions dealing with the Dividend Payout to shareholders is an essential aspect of the Public Limited Company (PLC) operation. The Dividend payout decisions are generally referred to financial decisions as dividend payables reduce the company retained earnings and thereby affect the company financial position.

The dividend policy significance for the company performance occurs through a few reasons. Firstly, the dividend policy makes an impact on the relationship with prospect and actual investors in equity capital (share capital, first and foremost). The reason is that investors are reluctant to invest in companies reducing its Dividends Payout associating the latter with the company’s financial difficulties. Moreover, certain investors rely on their dividends as a permanent income.

Secondly, the dividend policy influences the company financial strategy and its capital investment budget. It is an inherent element of the long-term financial policy being, in turn, a financial strategy implementation instrument. The dividend payout presumes the reinvested earnings decrease, a potential long-term financial investment source, correspondingly resulting in capital investment budget reduction.

Thirdly, the dividend payout leads generally to cash outflow resulting in the company liquidity decline.

Fourthly, the Dividend Payout results in the retained earnings reduction, mentioned earlier, decreasing the equity capital and company financial stability.

Meanwhile, the dividend policy on the one hand has to ensure the basic financial management goal to be attained, i.e., the maximum shareholders well-being, on the other, take into account all company stakeholders’ interests.

Therefore, the dividend policy management developing and justifying, an important role is paid to the formalized analysis and forecasting of the scores related to the requirements stated above.

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