Issues concerning the assignment and payment of a certain portion of profit are regulated by the regulation on dividend policy. It is adopted by the Board of Directors for a period of 3 to 5 years and is one of the key documents regulating relations between investors and the company.
The following elements are highlighted in it:
general norms;
list of shareholders who are entitled to receive a share of the profits;
the procedure for notifying interested parties about changes to the dividend policy;
liability of the company for breach of the obligation to pay shares of profits;
final and transitional provisions.
There is no specific form for the dividend policy regulation, as it is adopted at the discretion of the company's founders. However, its presence plays an important role in attracting investors, so all large Russian joint-stock companies (JSC) develop and publish such documents.
Structure of the dividend policy statement
Objectives and tasks of dividend policy
One of the most important moj database issues that must be resolved within the framework of the company's dividend policy is maintaining a balance between the desire of investors to obtain maximum profit and to ensure the company's growth. If part of the income is directed to payments to shareholders, then the company's ability to increase fixed assets, equity capital and a number of other indicators that determine the economic stability of the organization in the long term is reduced.
At the same time, non-distribution of this part of the profit or low dividends may reduce the attractiveness of the company for investors, who will start selling its shares. As a result, the securities will fall in value on the stock exchange, which is fraught with the loss of control over the stability of capital by the owners of the enterprise.
In this regard, the dividend policy should define mechanisms that allow taking into account the said mutually exclusive interests and ensure both a stable amount of investment in the company's capital, an increase in the profitability of shares, and the development of the enterprise.
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In general philosophy, the goal is the result that is expected to be obtained at the end of any activity. Dividend policy also has its own guidelines. Usually, the main one comes down to a combination of maximum consumption of profit from the company and investments in its development, aimed at increasing the capitalization of the enterprise.
Several other goals of the DP are also identified:
formation of a clear and consistent mechanism for decision-making by shareholders on issues related to the amount, form, frequency, and procedure for paying out shares of profits;
drafting rules that govern the adoption and amendment of dividend policy.
Based on the stated goals, it is possible to determine the range of tasks that the DP solves.
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Alexander Kuleshov
Alexander Kuleshov
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