To help investors in taking an informed investment decision
Stock market regulator Securities and Exchange Board of India (Sebi) has made it mandatory for the top 500 listed companies in terms of market capitalization to formulate and disclose a dividend distribution policy in annual reports and on their websites. The dividend distribution policy will include the circumstances under which shareholders can or cannot expect dividend, the financial parameters that will be considered while declaring dividends, internal and external factors that would be considered for declaration of dividend, policy as to how the retained earnings will be utilized and provisions in regard to various classes of shares.
When a company proposes to declare dividend on the basis of parameters other than what is mentioned in the dividend distribution policy or proposes to change its dividend distribution policy, it will have to make appropriate disclosures. According to Sebi, a formal dividend distribution policy will help investors in taking an informed investment decision.
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