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Dividend Policy
A company�s approach to distributing profits to its shareholders, which can influence investor perception and stock price.
Implications
The guidelines a company follows when deciding how much of its profits will be distributed to shareholders in the form of dividends versus how much will be reinvested in the business, impacting investor satisfaction and financial strategy.
Example
Example: A mature technology company adopts a dividend policy that pays out 40% of its annual profits to shareholders, retaining the rest for R&D and business expansion.
Related Terms
Different from a stock buyback, which returns capital to shareholders by repurchasing shares, a dividend policy directly distributes cash to shareholders on a regular basis.
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