Source: China Paper Download Center [06-08-04 10:55:00] Author: Huang Ying Editor: As one of the core financial problems of enterprises, dividend policy has been concerned by all parties. Because the distribution of dividends is not only related to the interests of shareholders and creditors of the company, but also related to the future development of the company. If you pay a higher dividend, on the one hand, shareholders can get considerable investment income, on the other hand, it will also cause the market price of the company's stock to rise. However, excessive dividends will reduce the company's retained profits, or affect the company's future development, or increase the cost of capital due to borrowing and issuing new shares, and ultimately affect the company's future earnings. Although the lower dividend has made the company have more development funds, it goes against the wishes of the company's shareholders, resulting in a decline in the stock price and a damage to the company's image. Therefore, how to formulate dividend policy, make dividend distribution adapt to the company's future sustainable development, and make the company's share price rise steadily has become the ultimate goal of the company's management.

First, how do listed companies formulate dividend policies

When formulating dividend policy, the management of listed companies should follow certain principles and fully consider some factors that affect dividend policy, so as to protect the interests of shareholders, the company itself and creditors and standardize the company's income distribution.

(1) General principles of dividend distribution.

1, tax priority principle. Enterprises must pay all kinds of taxes according to law before distributing dividends to shareholders.

2. The principle of making up for losses. The business performance of an enterprise is different every year. If there is a loss in the previous year, the enterprise must make up for the loss in the previous year before distributing dividends.

3. The principle of drawing statutory provident fund. After making up the losses in previous years, if there is any after-tax profit in that year, the enterprise shall withdraw the statutory reserve fund from it. China's "Company Law" stipulates that the proportion of statutory reserve fund is 10% of the after-tax profit of the current year, and it may not be withdrawn when the accumulated amount of statutory reserve fund reaches more than 50% of the registered capital.

4. The principle of the same share and the same benefit and the equality of shareholders. The after-tax profit of the company, if any, can be distributed among shareholders after making up the losses and withdrawing the statutory reserve fund and statutory public welfare fund. Dividend distribution should be based on the principle of equal benefits for the same shares and equality for shareholders, that is, an enterprise must treat all shareholders equally when distributing dividends, and there should be no differences among shareholders in distribution date, distribution ratio and distribution method.

(2) Factors affecting dividend policy.

1, restricted by laws and regulations. China's laws and regulations affect the company's dividend policy in the following three ways:

First, the company law stipulates. Article 130 of the Company Law stipulates that shares must be issued with the same rights. Article 177 stipulates the order of dividend distribution, that is, when the company distributes the after-tax profits of the current year, it should first withdraw the statutory reserve fund and the statutory public welfare fund (before withdrawing the statutory reserve fund and the statutory public welfare fund, it should first use the profits of the current year to make up for the losses), and then distribute according to the proportion of shares held by shareholders. Article 179 stipulates that when the shareholders' meeting of a joint stock limited company decides to convert the statutory reserve fund into capital, the retained reserve fund shall not be less than 25% of the registered capital.

Second, the provisions of the individual income tax law. According to the Individual Income Tax Law and the Notice of State Taxation Administration of The People's Republic of China, People's Republic of China (PRC) on Several Issues Concerning the Collection of Individual Income Tax, 20% income tax is levied on dividends, dividends and stock dividends obtained from shares owned by individuals.

III. Provisions of the Notice on Several Issues Concerning the Regulation of Listed Companies. (1) If a listed company really needs to pay dividends in the medium term, its distribution plan must be formulated after the interim financial report has been audited by an accounting firm qualified to engage in securities business; The publication date of the interim distribution plan shall not be earlier than the publication date of the interim report of the listed company; After the interim distribution plan is approved by the shareholders' meeting, the board of directors of the company shall complete the distribution of dividends (or shares) within two months after the shareholders' meeting. (2) Formulate a fair distribution plan, not distributing cash dividends to some shareholders, but distributing stock dividends to other shareholders; (3) If a listed company formulates a rights issue plan and a dividend plan at the same time, it shall not take the rights issue as a prerequisite for dividends. (4) The dividend plan of a listed company must clearly distinguish between dividend payment and capitalization of reserve fund, and make a separate resolution at the shareholders' meeting and disclose it separately. Neither of them can be expressed as dividend payment. 2 National macroeconomic environment. The economic development of a country is cyclical. When a country's economy is in different development cycles, it also has different effects on the formulation of its corporate dividend policy. Accordingly, listed companies in China will also be affected by the macroeconomic environment when formulating dividend policies. At present, the form of cash dividend is larger than in previous years, increasing year by year. 3 inflation. When inflation occurs, depreciation reserves often cannot meet the needs of replacing assets. In order to maintain the original production capacity, the company needs to make up for it from the retained profits. At this point, the management may adjust its dividend policy, resulting in a decline in the level of dividend payment.

4. The financing environment of the enterprise. When there is a relatively relaxed financing environment objectively, enterprises can issue debt financing dividends and equity financing dividends, that is, the company borrows new debts or issues new shares to finance dividends. Generally speaking, the larger the enterprise, the stronger its strength, the stronger its financing ability in the capital market, the greater its financial flexibility and, of course, its dividend-paying ability. For many small companies or newly established companies, it is difficult to adopt the financing dividend policy.

5. The maturity of the market. To measure the maturity of the market, it can usually be divided into three forms: weak efficient market, semi-strong efficient market and strong efficient market. The more efficient the market is, the more mature it is. The empirical results show that in a relatively mature capital market (semi-strong efficient market), cash dividend is the most important form of dividend, while stock dividend shows a downward trend. As China is still a new capital market, stock dividend is still an important form of dividend in China compared with mature markets.

6. Industry where the enterprise is located. Dividend policy has obvious industry characteristics. Generally speaking, the dividend payout ratio of mature industries is higher than that of emerging industries, and the dividend payout ratio of public utility companies is higher than that of other industries. Empirical evidence shows that the average dividend payout ratio of the industry is negatively correlated with the investment opportunities of the industry.

7. Liquidity of enterprise assets. The so-called liquidity of assets refers to the difficulty of converting enterprise assets into cash. The better the cash flow and the overall liquidity of assets, the stronger the ability to pay cash dividends. However, growing and profitable enterprises are usually unwilling to pay cash dividends if they invest most of their funds in fixed assets and permanent working capital, which endangers the safety of enterprises.

8, the life cycle of the enterprise. We usually divide the life cycle of an enterprise into growth period, development period and maturity period. At different stages, the dividend policy of enterprises will be affected in different ways. In the growth stage, enterprises urgently need capital investment. Generally speaking, the dividend rate is relatively low. In the development stage, the company began to transfer its income to shareholders with a large proportion of dividends; In the mature stage, due to the relatively stable input and output, the dividend payment rate and stock return rate will remain almost unchanged.