Dividend Policy

Dividend policy can be dividend policy can be defined as a policy that a company uses to decide how much it will pay out to their share holders. The term of having a high dividend it self it shows that the company has a high profits or having an excellent performance, on the other hand the term of having a low dividend shows that this company are having a low or negative profit or having a bad performance. Dividend of the company are usually paid out in relevant the company are paying out to their shareholders when the company are having a surplus money. While sometimes the company are paying their investors with a high amount of dividend because of they still want to keep their investors, because when company are paying their investors with a low dividend it makes their investors to sell their share price.

Moldigiani and Millar (1961) argue that share price where determined by future earning potential not dividends paid out. In addition, the share value of the company are usually paid out determined by the investment policy not the amount of earning distributed. This assumptions come out from believing in rational investors are usually searching for a capital gain and dividends. Before this view there are actually two views that has been used by them which are Linter (1956) and Gordon (1959) that are having usually a similar views which is the arguments that dividends are preferable to capital gains because uncertainty.  

In a real word practice most of the costumers are usually seeking a stable dividends, where they are believe that if they are giving a low dividend they will lost the investors, but in giving a high dividend most of the managers are afraid that they can not maintain the unsustainable in the future. Most of the company are usually not giving all of the surplus money eventhough they are making a lot of profit.

Jupiter suffers from after revenue miss forecast because a miss analyst due to a strong by its funds and a large inflows of new client money. This leads to a sending Jupiter shares down 20.3p, or 6.4 per cent to 298p on friday.The market valuation of Jupiter, which went public in June with shares priced at 165p, has risen more than 80 per cent since, making it one of the best-performing European initial public offerings above $100m (£62m) last year.Jupiter used some proceeds from the offering to strengthen its capital position. Net debt fell to £63m at year-end, compared with £140m in the prior year.In the 12 months to December 31, pre-tax profit was £42.4m, compared with £7.2m a year ago while net revenue came in at £230.5m, up from £182.1m.The fund manager’s board recommended a maiden dividend of 4.7p per ordinary share. Mr Bonham Carter said the group intended to implement a progressive dividend policy in the future.He said more than 50 per cent of its mutual funds by AUM were ranked in the first quartile in terms of three-year investment performance.Warnings that margins are expected to fall after an overhaul of how retail investors pay for fund management in the UK may also have spooked markets.“We expect net management fee margins to decline over time, as distributors take an increasing share of fees and the retail distribution review alters industry pricing structures,” Mr Bonham Carter said (Financial Times, 2011).

Through analysing Jupiter case by having a high expectation towards their dividend will lead to a loss of investors that actually will lower the share price of the company and leads an inconsistency of performance that this company made. where actually most of the investors are seeking towards a stability of performance that the company made. It can be conclude that, managers are better to always make sure the sustainability of the company by always controlling the divined policy of their company because actually investors are seeking for it and hence it will help the company growth.