Talking Cents

Our small business accountants in Melbourne explain the different types of Dividend Policies

What is a dividend policy? It is a policy that a company will decide on using to decipher how much it will pay out to shareholders in forms of dividends. Our small business accountants in Melbourne will explain the different types of dividends policies.

When a company is deciding on what policy is best for them, they need to understand that shareholders see this as an income. Not only do you take your business into consideration but also your shareholders are well. There are three types of dividend policies: a stable dividend policy, a constant dividend policy and a residual dividend policy.

The stable policy is one of the most common used in dividends and aims to provide a steady and predictable payout every year.

When using the constant policy, a percentage of the company’s earnings are paid every year, if there is a boom in profits there will be a boom in your pay out.

The residual policy is what most shareholders believe all companies should use, in this policy the company pays all of its capital and working expenditure and the pays out what is left from that.

Our small business accountants in Melbourne will help set up the right policy for you company!