{"id":489,"date":"2020-09-16T22:42:09","date_gmt":"2020-09-16T16:42:09","guid":{"rendered":"https:\/\/agribusinessedu.com\/?p=489"},"modified":"2020-12-17T14:55:02","modified_gmt":"2020-12-17T08:55:02","slug":"dividend-choice-approaches-for-agribusiness","status":"publish","type":"post","link":"https:\/\/agribusinessedu.com\/dividend-choice-approaches-for-agribusiness\/","title":{"rendered":"Dividend Choice Approaches for Agribusiness"},"content":{"rendered":"

Introduction of Dividend Choice Approaches for Agribusiness<\/strong><\/span><\/h2>\n

Dividend choice approaches for agribusiness followed by different agro firms. The dividend is the sum of income paid by the company to its shareholders. The dividend policies<\/a> of an organization split its net earnings into two parts: retained earnings and dividends. Dividends refer to the part of the net profits of a company that the shareholders are paid out to. On the other hand, the retained earnings provide funds to finance the company’s long-term growth. That is why the dividend decision is a significant financial management decision in the sense that the company has to choose between distributing the earnings to the shareholders and ploughing them back into the company.\u00a0\u00a0<\/span><\/p>\n

The after-tax net profit of a corporation can therefore be divided into two groups:<\/span><\/p>\n

    \n
  1. \n
    Funds to finance long-term growth:<\/strong> A large portion of a company’s net earnings are to be retained for long-term funding. Such revenues can be treated as a source of long-term funding. The dividend can only be paid if the company lacks productive investment opportunities. When the company embraces highly profitable investment projects, it expands at a quicker speed<\/strong>.<\/span><\/h5>\n<\/li>\n
  2. \n
    Funds to be allocated to shareholders:<\/strong> These are reflected by the cash dividend declared by the board of directors and paid to the shareholders in common. There is a kind of reciprocal relationship between long-term funding retained earnings and cash dividends: greater retention, lower dividends; lower retention, larger dividends.<\/span><\/h5>\n<\/li>\n<\/ol>\n

    Dividend<\/a> Choices Approaches <\/strong><\/span><\/h4>\n

    Long-term funding and the return allocated to shareholders are influenced by dividend policies. So, the dividend choice approaches for agribusiness can not be avoided by agro firms. Therefore, the decisions of a corporation to pay dividends can be influenced by two potential perspectives described as below:<\/span><\/p>\n

    a) As a decision on long term funding <\/em><\/strong><\/span><\/h5>\n

    If a decision on a dividend is considered a decision on long-term funding, the company’s net earnings can be regarded as a long-term source of financing. The cash dividend declaration decreases the number of funds available to finance growth and either limits growth or requires the organization to pursue other sources of funding. Thus, as long as one of two conditions remains, the company must adopt a guideline to maintain earnings:<\/span><\/p>\n