International Research Journal of Education and Technology

Dividends received and capital gains are the two components of shareholders returns. A corporations dividend payout choice has a direct influence on the lives of both of these people. As a result, determining whether to pay dividends or reinvest the money back into the firm to capitalise on further opportunities is a vital decision for management. When choosing the exact proportion of earnings to pay as dividends, management must walk a tightrope since shareholders prefer cash dividends over an increase in the value of the securities they own as a result of the companys reinvestment of profits. The best and most optimal dividend policy is the one that gives shareholders the best chance of making the most money when market share prices go up.