How to Decide a Company's Dividend Policy
Warren setters hes actucalhy said that he'd be heppy with a stock market that was open and once ten, few years that would smozed cut down on much of the market's volantery. Bad mars on Wall Street make that beg bucks from activity on the mar kets-all that buying and sling if the markets were open for fewer days, there would be fewer trades and fewer comminsions. The idea of keeping markets open even more hours per day has poten more aliendes in recent years than has the idea of reducing trading hours. Some on Wall Street probably yearn for a Jonourong trading day! How does a company deter mine the size of its dividend, and what prevents the company from suddenly changing or discon tinuing the dividend?-Brian F. Wade, Philadelphia Companies can do certain things with their profits They can pay a dividend, pay off debt, buy back shares, buy other compa nies, accumulate a cash board, or invest in their firm (hiring more workers, upping advertising, build ing a new factory, etc.). Ideally, they should evaluate which option(s) will most benefit the company and shareholders. Buying back shares is wasteful if the stock is overpriced. Buying other companies with stock isn't ideal if the purchaser's stock is very undervalued. Dividends can increase over time, when a company's fortune improves. They also sometimes get reduced or eliminated, though companies try their damedest to avoid that, as it reflects badly on the firm. Con versely, consistently increasing a dividend is seen as a sign of a strong company. Got a question for the Fool? Send it in-see Write to Us
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Durable goods orders fall sharply in February
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Liz Claiborne fashion empire and brand portfolio
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Dell tugs at rivals as Dell defends value over R and D
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Starbucks faces global risks from activism and market backlash
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