Arguments against dividends First, some financial analysts believe that considering a dividend policy is irrelevant because investors have the ability to create "homemade" dividends. These analysts argue that this income is earned by individuals adjusting their personal portfolios to reflect their preferences. For example, investors seeking a steady income stream are more likely to invest in bonds (whose interest payments do not change), rather than stocks that pay dividends (whose value can fluctuate). Since interest payments won't change, those who own bonds don't worry about a particular company's dividend policy. The second argument holds that little or no dividend payment is more favorable for investors. Supporters of this policy point out that the tax on dividends is higher than that on capital gains. The argument against dividends is based on the belief that a firm reinvesting funds (rather than paying them as a dividend) will increase the value of the firm as a whole and consequently increase the market value of the shares. According to supporters of the no-dividend policy, a company's alternatives to paying out excess cash in the form of dividends are as follows: undertaking more projects, repurchasing the company's own shares, acquiring new profitable companies and businesses, and reinvesting in financial assets.Arguments in favor DividendsIn opposition to these two arguments is the idea that a high dividend payment is more important to investors because dividends provide certainty about the financial well-being of the company; Dividends are also interesting for investors who wish to secure a current income. Furthermore, there are many examples of how decreasing and increasing dividend payouts can affect the price of a stock. Companies that have a long-standing history of stable dividend distributions would be adversely affected by the reduction or omission of dividend distributions; these companies would be positively affected by increasing dividend payments or paying additional dividends. Additionally, companies without a history of dividends are generally viewed favorably when they declare new dividends. Dividend Payout Methods Now, if the company decided to follow the high or low dividend method, it would use one of three main approaches: residual, stability, or a compromise between the two. Residual Companies that use the residual dividend policy choose to rely on internally generated capital to finance any new projects. As a result, dividend payments can come from the residual or residual capital only after all capital requirements of the project have been met. Usually these companies try to maintain balance in their debt-to-equity ratios before making any dividend distributions, which shows that such a company decides dividends only if enough cash remains after all operational and capital expenditures. expansion have been satisfied.