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viding for a more generous dividend policy and that a properly managed dividend policy had an impact on share prices and shareholder wealth. Since the M& M study, many researchers have relaxed the assumption of perfect capital markets and stated theories about how managers should formulate dividend policy decisions.
Problem Statement
Dividend policy has attracted a substantial amount of research by many researchers and theorists, who have provided theoretical as well as empirical observations, into the dividend puzzle (Black, 1976). Even though researchers and theorists have extended their studies in context to dividend decisions, the issue as to why corporations distribute a portion of their earnings as dividends is not yet resolved. The issue of dividend policy has stimulated much debate among financial analysts since Lintner's (1956) seminal work. He measured major changes in earnings as the key determinant of the companies' dividend decisions. There are many factors that affect dividend decisions of a firm as it is very difficult to lay down an optimum dividend policy which would maximize the long-run wealth of the shareholders resulting into increase or decrease of the firm's value, but the primary indicator of the firm's capacity to pay dividends has been Profits.
Miller and Modigliani (1961), DeAngelo and DeAngelo (2006) gave their proposition on the dividend irrelevance, but the argument made by them was on assumptions that weren't practical and in fact, the dividend payout decision does affect the shareholders value.
The study focuses on identifying various determinants of dividend payout and whether these factors influence the dividend payout decision.
Research Objective:
There are many theories in the corporate finance literature addressing the dividend issue. The purpose of study is to understand the factors influencing the dividend decision of companies. The specific objectives of this study are:
To analyze the financials of the company to draw a framework of factors such as Retained earnings, Age of the company, Debt to Equity, Cash, Net income, Earnings per share etc. responsible for dividend declaration.
To understand the criticality of a company's profitability (in terms of Earnings per share) component in declaration of dividends.
To measure each factor individually on how it affects the dividend decision.
Research Questions:
Q1. What is the relation between dividend payout and firm's debt?
Q2. What is the relation between dividend payout and Profitability?
Q3. What is the relation between dividend payout and liquidity?
Q4. What is the relation between dividend payout and Retained Earnings?
Q5. What is the relation between dividend payout and Net Income?
Scope of the Study:
This study investigates areas of concern that are extensive thereby due to limitation of time; the scope of research will be limited as the period
