Dividend Policy Essay Example | Topics and Well Written Essays - 750 words

Dividend Policy - Essay ExampleArrivas balance sheet of last 5 years (from 2004-2008) is densely populated with debt financing and it is obvious because Arriva is a servicing business. Its debt financing of last 5 years lies amid (65% to 76%) and its equity financing lies between (24% to 35%). The summary of Arrivas last 5 year dividend policy is summarized belowIt is an evident item that the Arrivas dividend policy is in stable condition and grows steadily in response with the revenue generation. From the investors standpoint, Arrivas dividend growth rate is predictable and the investors show a substantiative response towards the companys policies.Arrivas dividend policy is desirable for the investors. Investors do pay attention on those stocks which pay more dividend than the predictable one. In addition, the Arrivas cost of equity is minimized in the whole 5 year elevate this move non only maximizes the stock price but also stabilizes the dividends to sooner an extent and is a healthy indication for future (Annual Report, 2008).In the current scenario of 2008, Arrivas shares outlook is positive although in that financial period oil prices rising and it might not only bring both(prenominal) implications on the stock price but also on the dividend structure (Annual Report, 2008).The anxiety of Arriva is beneficiary because its management hedges the oil prices which in the end not bring the curse on the stock prices as comfortably as on dividend. In 2008, Arrivas dividend is 24.06 (GBp per share). (Annual Report, 2008)After reviewing the whole 5 years dividend policy and dividend structure, it is quite evident that Arriva maintaining progressive dividend policy and also utilizes its capital structure at the utmost level.A stanch which is in growing condition may suffer with a liquidity problem and they are not in a position to pay the nominal dividends in contrast with those firms which generates more consistent currency flows.The difference in payout ratios also