There are many financial policies that we need to know. One of them is the dividend policy. So, what is the definition of dividends itself and what benefits can be taken from the existence of a dividend policy? Let's discuss about it here.
The definition of a dividend is a type of payment made by a corporation to its shareholders from the profits generated by the corporation. This dividend distribution is not just that simple, there are deadline requirements that need to be considered. The deadline that share recipients need to pay attention to is adjusting the financial report deadline. Shareholders who are included in the share recipients based on the financial statements will get the opportunity to receive this dividend.
Dividend policy is made for the stability of the long-term value of the company itself. However, not all companies carry out this policy. some companies may prefer alternatives or other ways to ensure company stability. For example, company profits are used to cover debts first. Or the company decides that the profit is better used for investment.
What are the benefits that can be taken if a company carries out this dividend policy?
The benefits of dividend policy can be felt by both, companies and shareholders. Some of the benefits are:
1. Increase investor confidence in the company. Investors will trust and survive with consistent dividend payments. This will also attract new investors which allows the company to strengthen its capital structure.
2. Improve the company's image. If a company pays dividends consistently, the public will evaluate the company favorably. This leads to increased opportunities for cooperation and investment.
3. Opportunities for increased investment value. Dividends paid by the company give shareholders the option to reinvest more of their shares in the long term.
4. As passive income. For shareholders, the dividend policy can serve as passive income for them. This helps increase overall income and achieve financial goals.
5. Supports economic growth. Last but not least, the benefits that can be derived from the dividend policy can also be felt in terms of economic growth. Dividends can increase people's purchasing power and encourage consumption.
The five benefits above can be considered by companies to distribute their dividends. It should also be noted that not all companies always have a dividend policy. Only companies that have sufficient net profit can distribute dividends to shareholders. The amount of dividends also varies depending on company performance, dividend policy, and economic conditions. However, in general, dividends make a positive contribution to company development and economic growth.
Author: Barokatut Toyibah
Institution : UIN Sunan Kalijaga Yogyakarta
The writing of this article is used to fulfill the assignment of the Financial Management course by Dr. Darmawan.
