Question

What did Helen Bedford mean when she said, “Those shareholders who don’t like our dividend policy can create ‘Homemade dividends’”? How can one make homemade dividends? Assume you are a shareholder who owns 1,000 Shares and are expecting the company to pay at least $0.25 per share. If the company decides to retain all its earnings, how can you create homemade dividends?

Answer 1

HOME MADE DIVIDEND

1. WHENEVER COMPANY DECREASE THE AMOUNT OF DIVIDEND

SHAREHOLDER WILL SHARE'S COMPANY' S SHARE IN SUCH A MANNER THAT HE GET THE DECREASE DIVIDEND

2. WHENEVER COMPANY INCREASE THE AMOUNT OF DIVIDEND

SHAREHOLDER WILL PURCHASE ADDITIONAL SHARE OF THAT COMPANY BY INCREASE DIVIDEND.

NOW CURRENT EARNING

1000 * .25 = 250

AFTER IF COMPANY DECIDE TO RETAIN ITS ALL EARNING

THEN SHAREHOLDER WILL SALE OF THEIR SHARE BECAUSE THERE IS NO ANY EARNING ON SHARE AND INVEST OTHER SHARE AND CREATE HOME MADE DIVIDEND