India Inc,. Issue bonus Shares and Dividends
Corpotate india has opends its purse stings to shareholders with interim dividends and bonus share.s Atleast 60 companies have declared interim divdend or announced plans to do so in the companies have announced bonus share issues this month, about three times more than january 2006.
There are range of things that a company can do for maximising shareholder value and dvideneds is companies need to balance it up between paying cash and bulding value of the stock for total shareholder reuturns.
This trend of dividends and bonuses is in synchronisation with the good profuts beings posted A number of companies have also announced plans of bonus shares for their shareholders. Most of the or announced that they would be taking it up in their next board meeting are small or mid-sized companies
What factors are considerd while taking this decision ?

Explanation

Factors affecting Divdned Decsion are :
(i) Amount of earinings dvidends are paid out of current and past earning . Thus earnings is a major determinant of dividedn decsion.
(ii) Stability in earnings A company having higher and stable earings can declare higher dividends thatn a company with lower and unstable earings.
(iii) Growth opportunitites Companies having growth opportunitites retian more money out of their earnings so as to fiance the required investemtn. THe dvidend declared in growth companies is , therefore smaller thant hat int he non-growth companies.
(iv) Cash flow position Dividend involves an outflow of cash. Availability of enough cahs in necessary for payment or declaration of deivdends.
(v) Taxation policy if the tax on dividends is higher, it is better to pay less by way of dividens. But if the tax rates are lower, higher dividends may be declared This is becasue as per the current taxation policy, a dividend distribution tax is levied on companies. Howeve, shareholders perfer higher dvidends, as dvidends are tax free int he hands of shareholders,
(vi) Access to capital market large and requted Companies generally have easy access to the capital market and , therefore may depend less on retained earnings to finance their growththese companies tend to pay higher dividends than the smaller companies.