Understanding Dividends:The Secret To Investment Success

Abstrack

Profit conveyance plays a significant part in corporate fund, serving as a instrument for companies to share their benefits with shareholders. This unique investigates the different components impacting profit arrangements, counting company productivity, development prospects, and speculator inclinations. Also, it dives into the affect of profits on stock costs, financial specialist behavior, and by and large advertise flow. Understanding profit flow is fundamental for financial specialists, supervisors, and policymakers alike in exploring the complexities of money related markets.

Keywords: company profitability,dividend, dividend policy, investor behavior,profit distribution,and stock prices

Introduction

The background of dividend issuance involves several aspects that need to be considered. The first is the role of dividends in determining the value and health of a company. Dividends are not only an indicator of a company's financial performance, but also influence investors' perceptions of a company's ability to generate stable profits. Second, the importance of dividends in influencing investment decisions. For investors, especially those seeking passive cash flow, dividends are an important consideration in choosing stocks. In addition, dividend policy can also affect stock prices and market liquidity.The decision to pay dividends is important, but not always easy.To make an optimal decision, companies need to consider various factors such as business growth, capital requirements, and investor preferences.Therefore, understanding the dynamics and factors that influence dividend policy is an important step for company managers and investors to optimize firm value and better manage investment risk.

The dividend issue involves the complexity of determining the optimal dividend policy, especially regarding the distribution of dividend payments and the retention of profits in corporate investment.In addition, continuing to pay dividends is often difficult for companies, especially in the face of fluctuating earnings or changing capital requirements. Dividend announcements can have a significant impact on stock prices and can be a source of deep consideration for company managers. In addition, investors often compare dividends paid with other investment options, thus influencing their interest in a company's shares.The competition between capital requirements for growth and dividend payments can create tension between shareholders and management. Equity issues also arise when companies pay large amounts of dividends to shareholders even though internal needs and employee compensation are not fully met. In addition, differences in taxation systems can affect the attractiveness of dividends to investors, with some tax systems encouraging lower dividend payments.

The objectives of dividend research include understanding the effect of dividends on firm value, analyzing investor preferences for dividends, examining the effect of dividend policy on stock prices, understanding the factors that influence dividend policy, analyzing the impact of dividends on market liquidity, and examining the impact of taxes on dividend payment decisions.

Research Method

This research is included in qualitative descriptive research. the object of this research is dividends on companies. data sources are in the form of analysis of each journal that refers to dividends, namely three domestic journals, three foreign journals and three journals from lecturers. and this research also applies literature and document analysis. in-depth literature review of dividend theory theory and also previous journals and document analysis such as analyst research, financial reports, and industry journals to gain insight into dividend trends and practices and their impact on firm value and large behavior.

Result and Discussion

 In the intricate world of corporate finance, dividends serve as a vital link between companies and their shareholders, embodying the essence of wealth distribution. As elucidated by Baridwan (1997), dividends represent a portion of profits allocated to shareholders in proportion to their ownership stakes. However, the landscape of dividends is not monolithic; it encompasses various types, each with its nuances and implications for both companies and investors.

Cash dividends, the most conventional form of dividend distribution, entail the direct payout of cash to shareholders. Yet, before companies declare such dividends, meticulous considerations must be made regarding the availability of sufficient cash reserves. Baridwan's insights shed light on the importance of prudent financial management in ensuring sustainable dividend policies.

In contrast, dividends on non-cash assets, also known as real estate dividends, offer an alternative means of distribution. These dividends may take the form of securities of other companies, goods, or other tangible assets owned by the company. Such dividends underscore the flexibility and creativity inherent in dividend policy formulation, allowing companies to leverage their assets for the benefit of shareholders.

Liquidation dividends represent a unique scenario wherein shareholders receive a partial return of capital, signaling the winding down of a company's operations. This form of dividend necessitates transparent communication between management and shareholders, as it involves the redistribution of both profits and capital. Stock dividends, on the other hand, present an intriguing avenue for wealth creation, whereby shareholders receive additional shares in proportion to their existing holdings.

The concept of accrued dividends introduces a layer of complexity, as it involves dividends that are accrued but not yet distributed due to insufficient cash balances. This phenomenon underscores the delicate balance between profitability and liquidity management, highlighting the need for strategic foresight in dividend policy formulation.

Beyond dividends, the notion of profitability emerges as a cornerstone of corporate success. Defined as the difference between total sales and total costs, profitability metrics offer insights into a company's operational efficiency and financial health. Financial analysts meticulously dissect profitability ratios to gauge a company's performance and potential for growth.

Moreover, the formation of companies through partnerships or collaborations, known as shirkah musahamah, underscores the dynamic interplay between capital investment and ownership structure. This collaborative framework enables stakeholders to navigate the complexities of the capital market, facilitating swift adjustments and capital allocation.

Delving deeper into the realm of dividend policy, Rent et al. (2000) define it as the practice followed by management in making profit distribution decisions over time. This strategic endeavor involves balancing the interests of shareholders, the company's financial health, and its long-term growth prospects. However, dividend policy remains a contentious issue in corporate finance, characterized by ongoing debates and scholarly inquiries.

Despite decades of research and theoretical advancements, the dividend puzzle persists, challenging scholars to unravel its intricacies. Allen, Bernardo, and Welch (2000) encapsulate the enduring enigma of dividends, emphasizing the unresolved nature of corporate dividend behavior. Nevertheless, this perpetual quest for understanding underscores the dynamic nature of corporate finance, where dividends, profitability, and dividend policy intersect to shape the trajectory of businesses and investors alike.

Conclusion

The first is the role of dividends in determining the value and health of a company. Dividends are not only an indicator of a company's financial performance, but also influence investors' perceptions of a company's ability to generate stable profits. Second, the importance of dividends in influencing investment decisions.For investors, especially those seeking passive cash flow, dividends are an important consideration in choosing stocks. In addition, dividend policy can also affect stock prices and market liquidity.The decision to pay dividends is important, but not always easy. To make an optimal decision, companies need to consider various factors such as business growth, capital requirements, and investor preferences. Therefore, understanding the dynamics and factors that influence dividend policy is an important step for company managers and investors to optimize firm value and better manage investment risk.

Reference

Turah Dharma (2016):pengaruh kebijakan deviden,likuditas,profitabilitas,dan ukuran Perusahaan terhadap nili perusahaan

Darmawan (2018): Dividend Omission Announcement Effect to Market Reaction in Indonesia Stock Exchange

D.nissim (2001) : dividend changes and future protafibility

Franklin Allin (1995) :dividend policy

Michael Raferty (2010) : dividend policy A review of theories and empirical evidence

Dede Khasanah (2018) : kebijakan dividen dalam keuangan syariah

Rika Ratnawati (2008) : pengertian dan jenis dividend