The article reveals dominant approaches to the company’s dividend policy in the market economy through analyzing a system of core finance managers’ objectives for the company’s dividend policy that contemplate maximizing owner wealth while providing adequate financing for the company; enlightening the key factors that influence dividend policy, among which should be mentioned company growth rate, profitability, earnings stability etc.; examining the main issues of stockholder tax consideration based on the fact that dividends are considered ordinary income and are taxed at the full rate. This fact generates investor’s psychological dilemma between choosing a stock repurchase or taking earnings as dividends. In particular, capital gains that arise from the appreciation of the market price of stock have a tax advantage over dividends except in certain situations.

The article also unveils the existing dividend policy controversy that could be defined as a choice between earning retention or capital gains of the company and dividends depending on the particular characteristics of the firm and its owners.


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