17.3 STABILITY OF DIVIDEND PAYMENTS

17.3.1 Meaning of Stable Dividend

It is a normal practice among the firms to make stable dividend payments. The question, however, is what stability actually means. Stability is often interpreted in three ways. They are as follows:

  1. Constant dividend per share;
  2. Stable dividend pay-out ratio;
  3. Low Constant dividend per share plus extra dividend in times of greater earnings.

Constant dividend per share: If the dividend policy involves constant dividend per share, this implies a constancy in the size of dividend. If a company pays Rs 5 as dividend in the current year, the amount will be the same in years to come in spite of changes in the earnings per share (EPS). However, if there is a consistent upward trend ...

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