Question

1) is it positive or negative to pay higher dividends? To pay lowee dividends? why?

Answer 1

Paying higher dividends or lower dividends does not necessarily have positive or negative impact. What is important is to have a consistent dividend policy so that the company attacts a specific clientele.

Paying higher consistent dividends entails a clientele group consisting of people who require regular high income. For such companies growth may be low.

Paying lower dividends may promise higher growth and hence may attract investors who look for long term gains.

But, having a consistent dividend policy is important. If dividends are at a growing scale, the growth should be sustainable in the long run. Fluctuating dividends will not be preferred by any clientele groups. If a firm has surplus cash it can think of making a special dividend or making share repurchases. This will not signify any change in dividend policy.