Week 11: Dividend policy

Dividend policy

Based on my research, most of investors are more likely to choose dividend payment rather than capital gains, since it needs a long-term period and it can be considered more risky for most of the investor. I think the investors would like to get cash dividend due to additional capital gains from bonus share for them. Based on the theory of “ Bird-in-the-hand” theory most of people will think the long-term gains is more risky rather than existing dividend. All these things above are from the investor perspective.

It brought my attention that there is another perspective from the shareholders and the managers from the company about the dividend policy. The managers and shareholders in the company should consider of how long their company have succeed of the company, because they should consider about the saving more earnings for their expansion or project. My logic says that the investor will maintain their shares if they see the company’s is growing, but if they see the company that they invested stay at the same point they will think twice to maintain their shares. I think the company should increase their dividend in sequence to maintain the investors to keep invest in the company. However, the company which been invested should decide carefully in making the dividend policy, because it can make their company suffers losses.

Everyone must be now about the company that produced the famous iPhone 5, iPad, iPod, MacBook, and iMac, which is Apple Company, in this blog I will take this company as the real firm example. I was very surprised when I see the annual report of Apple Company in 2013; it stated that the cash return with the amount of $45 billion has overdue by three years. The result from this statement bring the shares from Apple Company $10.09, it is lower than before. The boards of Apple Company were predicts the decreasing of the iPhone 5 sales is due to the new of the upcoming Samsung Galaxy 4, which is the toughest competitor of iPhone 5. I am not saying that iPhone 5 having bad sales, but it is not as booming as the first launch.

The research and development team of Apple Company still working hard in order to satisfying and attract more customers by developing new iOS 6.1 for Apple’s gadget. They hope by this development, they will increase their sales and leads to an increase of the revenue. To conclude, it can be seen that Apple Company aiming for the long-term growth strategy of innovation. I think it is better for them to cuts their dividend return to avoid lack of capital in their company and they could focus on the process of the development of their gadgets and technologies. They should compete with the competitive market of technology nowadays in order to make the company keep survive.