Benefit of dividend

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Guest

Guest (Querist)

30 May 2013 Can anyone please tell me what is the practical benefit of declaring dividend from a company point of view.

Pankaj Gupta

Pankaj Gupta (Expert)

30 May 2013 There are many theories behind wether a company should declare dividend or not. One theory states that a growing firm should not declare dividend and should use the money for investment in its business. While the other theory states that a firm which is regular in distributing dividends has high market value.

Wether the company should declare dividend or not is totally based on the conditions of the company and its environment.

But it is generally seen that , a company which is regular in distributing high dividends has good market value, and generally its shares are priced higher than normal.

Guest

Guest (Querist)

31 May 2013 Thanks for your clarification Mr. Gupta...but what about the companies where the shares are held by the promoters only.whether any tax or any other benefit could be derived from it...please confirm

Pankaj Gupta

Pankaj Gupta (Expert)

31 May 2013 In such case, no tax benefit is available because dividend is distributed out of profit after tax. In. my opinion as all the shares are held by promoters, therefore, the company should not distribute dividends rather it should invest the profit in some profitable investments, so the net worth of the company will grow.

Guest

Guest (Querist)

01 June 2013 Thank You...Its resolved

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