4.

Low payouts can mean the company is growing rapidly and has the potential for high
total returns.
Dividend payout ratios also decrease when companies with increasing earnings do not
increase their dividend payments at a corresponding rate. Investors generally regard
earnings growth positively because it usually means that management is able to grow
sales and manage costs. While companies in technology and other growth sectors
generally reinvest their surplus cash in operations and strategic acquisitions, investors
may pressure the management of companies with large cash balances to increase existing
dividends, pay one-time special dividends or buy back stock.
Finding a company that has a low dividend ratio is important to many investors. During
tough economic times a company that has a low dividend payout ratio is more likely to
survive an earnings decline. In addition, there is a good chance that the company will be
able to maintain their current dividend rate. Finding a good dividend payout ratio also
means that the money is reinvested into the company.
These ratios vary per industry and can be affected by different tax laws or market
conditions. In addition, a high payout may not always be a sound financial investment. A
company that is growing and poised to explode may pay very low dividends in order to
generate higher returns and higher stock prices. Alternately a company with a high
dividend payout ratio may have stock that is temporarily depressed.
6. The adequacy of the payout ratio depends very much on the sector. Companies in
defensive industries such as utilities, pipelines, and telecommunications have stable
and predictable earnings and cash flows, and thus can support much higher payouts than
cyclical companies. Bessemer steel is a producer of various parts for automobiles, light
trucks and other vehicles. It is under defensive industry, so the dividend payout is high,
company will has enough fund to invest. The price of the stock will be stable or even
higher.
8. Regular dividend policy: in this type of dividend policy the investors get
dividend at usual rate. Here the investors are generally retired persons or weaker
section of the society who want to get regular income. This type of dividend
payment can be maintained only if the company has regular earning.
Merits of Regular dividend policy:

It helps in creating confidence among the shareholders.

It stabilizes the market value of shares.
It helps in marinating the goodwill of the company.
It helps in giving regular income to the shareholders.