The primary focus on the equity investors, their shareholdings and the requirement to pay out the percentage of the profits of the company, was high and the investors too were looking forward to the dividend form their investments made like the golden eggs form the hen, form each of the corporations where they had invested.
With too many regulations to be adhered to, reports to be submitted to the boards, the safer measures for the shareholders in the knowing the financial health of the company was to await the percentage of dividend declared, which was very important for them to understand the capital appreciation and the stable return to expect in the volatile situations. The measure is always on how much total dividend is paid in terms of the total equity returns in the markets.
- while many investors do not associate the equity income with the capital appreciation, dividend has played an important element in building the wealth of the companies, in times of negative returns which acts like a cushion in times of falling markets
- the opportunity to accelerate growth is more if the dividend is reinvested for the investors to capitalize and accumulate additional shares during falling, market conditions at lower equity prices without a need to invest in any additional capital
- The quantitative and qualitative view to evaluate the stock with metrics dividend payment is an effective tool to analyze how good the company is qualitatively run.
- the management decision to distribute a portion of their earnings from the company to the investors and shareholders gives the meaningful perspective of the financial health of the company and confidence of management to face the future with a lot of discipline and efficient approach which buys in the trust of the investors
- no amount of creative accounting estimation or any manipulation is possibly done as the investors are paid dividend based on the accounting choices of the company and the regulations been followed
Investing involves risk which is inherent, and they cannot expect the same percentage of dividend to be distributed YOY, as past performance cannot be guaranteed in the future, hence investors should carefully read the objectives, the risk involved, charges and expenses associated with the prospectus before heavily investing in the shares of a company in public. Market conditions are strong stimulators in determining the straightforward and effective tool of the investors in analyzing the quality and net worth of the company which is expected from a company.