what is a dividend policy 
a dividend policy outlines how a company will distribute its dividends to its shareholders this policy details specifics about payouts including how often when and how much is distributed there are many types of dividend police including stable constant and residual policies investopedia crea taylorunderstanding dividendsbefore we jump into looking at divided policies let s talk about dividends dividends are a distribution of a portion of a company s earnings to its shareholders a company can choose to reinvest those earnings into itself to drive future growth or it can distribute those earnings to whoever owns equity in the company dividends are usually declared by a company s board of directors and are paid out on a per share basis to all shareholders who own the stock the decision to pay dividends is influenced by the company s profitability cash flow financial health and growth prospects all else being equity it s usually best or at least most attractive to investors if companies pay a consistent steady amount of dividends on a periodic basis for example investors generally prefer knowing they ll get 1 per share each quarter as opposed to getting a varying amount awarded each quarter however some investors may also prefer the potential of getting higher dividends at the risk of maybe getting lower dividends as well dividends usually vary based on the industry size and maturity of companies mature companies in stable industries may not need as much cash so they may be more likely to issue dividends growth oriented companies in capital intensive sectors like technology or biotechnology may prefer to hold onto their cash and not issue dividends in either case the company needs to have a policy that outlines what it plans to do we ll talk about that policy next 