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Explain three ways in which a company could pay dividends to its shareholders.

      

Explain three ways in which a company could pay dividends to its shareholders.

  

Answers


Kavungya
• Constant payout ratio policy
The company can pay fixed proportion of earnings attributable to shareholders as dividends. Since
the earnings fluctuate over time, the dividends will also fluctuate with the levels of earnings.

• Constant or fixed dividend per share policy
The company may pay a constant amount of dividends per share irrespective of earnings.
Shareholders earns constant dividends same as preference shareholders.

• Fixed/ constant dividends per share plus surplus
Under this policy dividends is fixed and paid each year. However, extra dividends will be paid
during years of high earnings.

• Residual dividend policy-
This is where dividends are paid out after investment opportunities have been financed.
Kavungya answered the question on May 5, 2022 at 13:42


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