Dividend Decision in Select Cement Companies - a Comparative Study

Abstract

A major decision of financial management is the dividend decision in the sense that the firm must choose between distributing the profits to the shareholders and ploughing them back into the business. The choice would obviously hinge on the effect of the decision on the maximisation of shareholders' wealth. Dividend policy of the firm, thus, has its effect on both the long-term financing and the wealth of shareholders. Since the relationship between dividends and value of the firm should, therefore, be the decision criterion, the management of a firm, while evolving a dividend policy, must strike a proper balance between the above-mentioned two approaches. The present paper deals with the analysis of aggregate financial variables relating to dividend policy of six selected cement companies viz. Ultra Tech, The India, J.K, ACC, Ambuja and Madras Cements Ltd. by using statistical techniques like Percentages, Ratios, Averages, S.D, C.V, R etc. The paper concludes that all the selected cement companies have shown higher retention ratios when compared to the dividend payout ratios. ACC, Ambuja and Madras Cements have capitalised their earnings by issuing the bonus shares. The relationship is found to be significant between DPS and MPS in respect of four companies such as Ultra Tech Cement Ltd, ACC Ltd, Ambuja Cements Ltd and Madras Cements Ltd.