Dividend policies determine how the earnings of a company are distributed. In an annual letter to Berkshire Hathaway’s shareholders, Warren Buffett explained that there are four options, or policies, that companies can do with their profits.
-They can reinvest in the company
-They can acquire other companies
-They can repurchase shares
-They can pay dividends (Ro, 2013)
There are many factors that determine which policy a company chooses. Dividend payout policies vary greatly among different industries and companies. A company’s earnings can either be retained and reinvested in a firm or paid out to shareholders in a form of a dividend. Research a dividend paying stock and evaluate how it relates to the company’s industry.
Briefly describe your chosen stock, and answer the following:
Describe the dividend policy of the company
Why has management chosen to pay a dividend?
How does this decision relate to the company’s industry and/or its maturity within the business life cycle?
Companies to consider choosing:
-Target
-JPMorgan Chase
-AbbVie
References to use, but not limited to:
