Importance of Dividend Decision

Dividend decisions are the most important aspect of the designed financial policy of the corporation as the effect of the dividend policy is evident and thus cannot be neglected. They last impact on the cost of capital and on availability. The dividend decision also determines the earning divisions between retained earnings and payments or return given to shareholders and investors of the company. The directors of the company are prudently responsible for making dividend decision on corporate finance. The directors of the company make decision regarding timing and amount of cash payment that has to be given to stockholders of the company. The funds retained by the companyas well as the amount that has to be allocated between shareholders can be considered by making effective dividend decision, these funds are closely linked to both financing and investmentdecisions.

In addition to this, the dividend decision significance also includes balancing between shareholders’ distribution and the company’s growth. Also, the dividend decision has a lasting influence on the value of the corporation. The dividend decision should strike balance between maximization of wealth and long-termfinancing decisions i.e. distribution of the dividend even in the absenteeism of the investment opportunity. Also, if the company pays fewer dividends, it would impact on the market price as well. The taxation amount is also determined by the dividend decision that is usually pays by the shareholders of the company. The maximization of the wealth of shareholders is the financial management objectivehowever;the win-win situation has to be ensured by the finance manager for both the company and shareholders (Sihler, 2017)

To sum up, the dividend decision is significant and it lasts impact on the financial structure, liquidity of the corporation, flow of funds, prices of stock, satisfaction of the shareholders and the growth of the corporation in the long run.

Company’s Dividend Policy and Performance

Rolls Royce Holding Company has been issuing non-cumulative redeemable preference shares which are also called C shares as an alternative to givinginvestors or shareholders a cash dividend.  It is decided by the shareholders that whether to redeem C shares for cash, to keep them or redeem shares and plough proceeds in the additional ordinary shares through using CRIP that is operated by the registrar. The voting rights are limited of the C shareholders as well as they can attract 75% dividend of the LIBOR on the nominal value i.e. 0.1p of each share. At any time, the C shares can be redeemed by the company compulsorily in case if the C share is issued less as compared to 10 percent of the total issued C shares or on the capital or acquisition restructuring of the company.

There are some rights associated to the special shares issued to the special shareholders for instance, HM government. There are no dividend rights given to special shares instead of the winding up event they have to be repaid in priority to other shares at the nominal value of the share.

The member holding one ordinary share has one voting right only……………………….

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