Schweser SS8/R30 Page 105: Dividend Policies Just wanted to make sure if I understood the difference in the following 2 methods correctly 1. Dividend Stability 2. Target Payout Ratio In the 1st case - company decides to maintain a constant dividend like say GE giving out a dividend of 31cents every quarter irrespective of the earning variability In the 2nd case - company decides to maintain a constant dividend payout ratio. So say if MSFT decides to have a DPR = 20%, then 20% of the earnings earned that quarter will be dispatched as dividends and the remainder 80% is re-ploughed in the firm to manifest endo-growth. Thus in this case the dividend dispatched each Q will vary with the firm earnings.
yes