Use BookMyEssay:Linter Model of Corporate Dividend Behaviour Assignment Help

John Linter, the professor of Economics and Business Administration proposed the Linter Model for Corporate Dividend that focused on two notions such as the target payment ration of the company and the speed at which the dividends adjust to target.

Some of the important facts of corporate dividend policies as observed by Liner are as follows:

• Companies have a long-run dividend-to-earning ratio as per the amount of NPV or Net Present Value projects.
• The increase in earnings is not sustainable. Due to this, the dividend policy shall not change materially till managers can see that the earning levels are highly sustainable.

Though all companies want to have constant dividend payout for maximizing the wealth of shareholders, the natural business fluctuations force the companies to project dividends depending on their target payout ratio. From this formulae, the board of directors of a company base their decisions about dividends on the current net income of the firm.

 The Common Approaches to Corporate Dividend

The Board of Directors of a company sets out the dividend policy including the date of distribution and rate of payout. It is the case where the shareholders cannot vote on the corporate measure. The main approaches to Corporate Dividend Behavior are given in our Linter Model of Corporate Dividend assignment help online as follows:

1. The residual approach where dividend payments are a result if leftover or residual equity after the particular project capital needs are met. The companies using this approach try to maintain balance in the debt-to-equity ratios before making distributions.
2. The stability approach where the board sets quarterly dividends at a part of the annual earnings. It minimizes uncertainty for investors and offers them with a steady income source.
3. A mixture of both the stability and the residual approach where the board of a company views the debt-equity ratio as a long-term goal. Under this situation, the companies decide to set dividend, which is a small part of the annual income and nay be maintained easily. The extra dividend can be distributed only when the income exceeds the general levels.

The Pros of the Lintner Model Corporate Dividend Policy

The pros of this policy are discussed in our help for assignment on Linter Model of Corporate Dividend Behaviour topics. With the help of this dividend policy, decision-makers are equipped better to support their decisions about dividends in the annual report. Corporate governance remains intact. Investors can find the right value of the shares of a firm.

The dividend growth models use future dividends as a determinant of the value of free cash and equity. Considering the increasing complexity of the ownership structure and the demanding nature of different investors, the dividend payouts are noticed from varied perspectives.

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