The chosen approach should provide a balance between the desire of investors to obtain maximum profit and the need to ensure the financial stability of the enterprise. The types of dividend policy discussed above (conservative, moderate, aggressive) are determined by different points of view on how such a payment affects the value of the company's shares and the income of investors.
The results of the previous analytical work are formalized at this stage in the form of a regulation on the DP. It is one of the main documents that determines the relationship between shareholders and the owners of the company, the attractiveness of the enterprise for investment. It establishes a specific calculation scheme, conditions, frequency of payments, as well as the period for which the established procedure is adopted.
Alignment of dividend policy with the goals and objectives of the company.
DP has a significant impact moj database on the financial position of the company, its ability to use additional resources for growth, its reputation on stock markets, and the possibility of capital inflow and outflow. Therefore, it cannot be separated from the solution of other strategic issues of the enterprise's activities.
The final outcome of this stage is the requirements that must be met in order for the dividend provision to be fully implemented.
Approval of the DP by the company founders.
A minority shareholder can sell shares at any time, and the collapse of the company will not cause him significant losses. Bankruptcy will have a different effect on the founders of the company, who will be ruined, so the dividend policy should be thoroughly studied by them and, if necessary, adjusted so that the financial position of the company is not jeopardized. Approval by the founders is a necessary condition for the implementation of the regulation.
Approval of the DP by the company founders
Distribution of profits in accordance with the approved dividend policy.
At this stage, the direct implementation of the provision on the DP is carried out, and the procedure for payments to shareholders provided for by it is carried out.
The main result is the determination of the share of net profit that is subject to reinvestment and the share allocated for dividends. The volume of financial resources that can be used to develop the company and increase its sustainability depends on their ratio.
Calculation of the total amount of dividend payments and making a decision on the amount per ordinary share.
This stage is especially important for the company's owners, since it is here that the issue of the amount of profit for the reporting period that they can use for their own needs is decided. To a large extent, the decision to issue dividends is determined by the stage of the enterprise's life cycle.
In particular, if a company plans to implement a program of technical re-equipment, the funds for which must be obtained from the sale of new shares, then the owners will have to adhere to a policy of paying out high shares of profits over a long period of time. In this case, it will be possible to expect that the value of the shares will increase, and this will allow attracting the necessary volume of investment.