Dividend Policy Essay Example | Topics and Well Written Essays - 750 words

Dividend Policy - Essay Example Arriva’s balance sheet of last 5 years (from 2004-2008) is densely populated with debt financing and it is obvious because Arriva is a servicing business. Its debt financing of last 5 years lies between (65% to 76%) and its equity financing lies between (24% to 35%). The summary of Arriva’s last 5 year dividend policy is summarized below: It is an evident fact that the Arriva’s dividend policy is in stable condition and grows steadily in response with the revenue generation. From the investor’s standpoint, Arriva’s dividend growth rate is predictable and the investors show a positive response towards the company’s policies. Arriva’s dividend policy is desirable for the investors. Investors do pay attention on those stocks which pay more dividend than the predictable one. In addition, the Arriva’s cost of equity is minimized in the whole 5 year tenure this move not only maximizes the stock price but also stabilizes the dividends to quite an extent and is a healthy indication for future (Annual Report, 2008). In the current scenario of 2008, Arriva’s share’s outlook is positive although in that financial period oil prices rising and it might not only bring some implications on the stock price but also on the dividend structure (Annual Report, 2008).The management of Arriva is beneficiary because its management hedges the oil prices which in the end not bring the curse on the stock prices as well as on dividend. In 2008, Arriva’s dividend is 24.06 (GBp per share). (Annual Report, 2008) After reviewing the whole 5 years dividend policy and dividend structure, it is quite evident that Arriva maintaining progressive dividend policy and also utilizes its capital structure at the utmost level. A firm which is in growing condition may suffer with a liquidity problem and they are not in a position to pay the nominal dividends in contrast with those firms which generates more consistent cash flows. The difference in payout ratios also