DIVIDEND POLICY DECISIONS

DEFINE DIVIDEND :-The term dividend refers to that part of

profits of a company which is distributed by the company among its shareholders.

It is the reward of the shareholders for investments made by them in the shares of the company .

A company on the otherhand , needs to provide funds to finance its long-term growth.

Factors affecting dividend policy decisionsLEGAL CONSIDERATIONMAGNITUDE AND TREND OF EARNINGS.DESIRE AND TYPE OF SHAREHOLDERSNATURE OF INDUSTRYAGE OF THE COMPANYFUTURE FINANCIAL REQUIREMENTSGOVT. ECONOMIC POLICYTAXATION POLICYINFLATION

CONTROL OBJECTIVESREQUIREMENTS OF INSTITUTIONAL

INVESTORS.STABILITY OF DIVIDENTS.

Dividend Payout RatioThe dividend payout ratio measures the percentage of a

company's net income that is given to shareholders in the form of dividends.

Example: ---The dividend payout ratio is a relatively simple calculation:Total Annual Dividends Per Share / Diluted Earnings Per ShareFor example, let's assume that Company XYZ distributed four

regular quarterly dividend payments of $0.25 each, for a total annual dividend payment of $1.00 per share. Over the same period, XYZ reported net earnings of $10 per share. Using the formula above, Company XYZ's dividend payout ratio is:

$1 / $10 = 10%In other words, Company XYZ distributed 10% of its net income

as dividends last year and retained the remaining 90% for other operating needs.

Calculation of Dividend Payout Ratio of indian oil limited ;-

Face value 10.00 10.00 10.00 10.00 10.00

Mar '13 Mar '11

Mar '12

Mar '10March 14

Dividend per share 8.70 6.20 5.00 9.50 13.00

Operating profit per share 64.67 56.58 75.96 51.94 62.19

Net operating profit per 1,949.01 1,841.45 1,641.20 1,363.84 1,109.73shareFree Reserves Per Share ------- --------- -------- 210.91 191.63

Bonus in Equity Capital 93.91 93.91 93.91 93.91 93.91

Earnings Per Share 28.91 20.61 16.29 30.67 42.10