Saikumar Reddy - DP

A
SYNOPSIS REPORT
ON
DIVIDEND POLICIES
AT
HDFC BANK LTD
Submitted
By
MEKALA SAIKUMAR REDDY
H.T.NO: 130420672146
PROJECT SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE
OF
MASTER OF BUSINESS ADMINISTRATION
Department of Business Administration

AURORA’S PG COLLEGE
UPPAL
(Affiliated to Osmania University)
2020-2022
Aurora’s PG College (MCA), Uppal
Department of Management
SYNOPSIS
Title of the Project : DIVIDEND POLICIES
Student Name : MEKALA SAIKUMAR REDDY
Hall Ticket Number : 130420672146
Signature of the Student :
Signature of the Guide :

TABLE OF CONTENTS
S. No. CHAPTER Page No
1 INTRODUCTION 1
2 NEED FOR THE STUDY 2
3 OBJECTIVES OF THE STUDY 3
4 RESEARCH METHODOLOGY 4
5 LIMITATIONS OF THE STUDY 5

1.1 INTRODUCTION
Dividend is a portion of the company’s earnings to be a distributed to its shareholder , based
on board of director’s decision .dividends are quoted as dividend per share (DPS) or
dividend yield. Most of the companies having stable and secure growth offer dividends when
their share prices become stagnant. However, several companies don’t offer dividends as all
profits are reinvested to ensure faster, better than average growth. The term Dividend refers
to that part of the profit of a company which is distributed amongst its shareholders. It may
therefore be defined as the return that a shareholder gets from the company, out of its profits,
on his shareholders. According to the Institute of Charted Accounts of India” dividend is a
“Distribution to shareholder out the profits or reserves available for this purpose”.
The Dividend policy has the effect of dividing its net earnings into two parts: Retained
earnings and dividends. The retained earnings provide funds to finance the long term growth.
It is the most significant source of financing a firm’s investment in practice. A firm, which
intends to pay dividends and also needs funds to finance its investment opportunities, will
have to use external source of finance .Dividend policy of the firm. The theory of empirical
evidence about the dividend policy does not matter if we assume a real world with perfect
capital markets and no taxes. The second theory of dividend policy is that there will
definitely be low and high payout clients because of the differential personal taxes.
The majority of the holders of this view also show that balance, there will be preponderous
low payout clients because of low capital gain taxes. The third view argues that there does
exist an optimum dividend policy. An optimum dividend policy is justified in terms of the
information in agency costs.

It is the reward of the shareholders for the investments made by them in the shares of the
company. It refers to the policy that the management formulates in regard to earnings for
distribution as dividends among shareholders. It determines the division of earnings between
payments to shareholders and retained earnings.
Dividends as a basis for value. Help determine the value of stocks. Individual investors buy
stocks expecting return from dividends and the eventual selling price of stock. Today’s price
represents the present value of those future expected cash flows.
From the whole market view the price of stock today is the present value of the infinite
stream of dividend.
1.2 NEED OF THE STUDY:
The dividend policy of a firm determines what proportion of earnings is paid to shareholders
by the way of dividends and what proportion is ploughed back in the firm for re investment
purposes. If a firm’s capital budgeting decision independent of its dividend policy, a higher
dividend payment will entail a greater dependence on external financing. On the other hand,
if a firm’s capital budgeting is dependent on its dividend decision, a higher payment will
cause shrinkage of its capital budget an vice versa. In such a case the dividend policy has a
bearing on the capital budgeting decision any firm, whether a profit making or non-profit
organization has to take certain capital budgeting decision.

1.3 OBJECTIVES OF THE STUDY:
 To know the various dividend policies followed by the firm.
 To study the importance of the dividend policies and their impact on the firm’s
capital budgeting decision.
 To analyze whether the dividend decisions have an impact on the market value
of the firm’s equity.
 To know the various dividends polices of the industrial credit and investment
corporation of India
 To interpret the various theories of dividend with reference to their assumptions
and conclusions.
1.4 SCOPE OF THE STUDY:
Dividend policies a firm distributes all profits or retain them or distribute a portion and retain
the balance with it. Which course should be allowed. The decision depends upon the
preference of the shareholders and investment opportunities available to the firm. Dividend
policies has a strong influence on the market price of the share. So the dividend policy is to
be determined in terms of its impact on shareholders’ value. The optimum dividend policy is
one which maximizes the value of the share and wealth of shareholders. The financial
manager should be determined the optimum payout ratio that is the proportions of net profit
to be paid out to the shareholders. The study is limited for 5years i.e., 2017-2021.
1.5 RESEARCH METHODOLOGY:
Data sources: The study is based on secondary data. Secondary data collected from annual
reports and also existing manuals and like company records balance sheet and necessary
records. The sources of information are classified to two primary and secondary data. The
data collected by the researcher and agent known to the researcher, especially to answer the
research question, is known as the primary data. Studies made by others for their own
purpose represent secondary data to the researcher.
Secondary sources can usually be found more quickly and cheaply than primary data
especially when national and international statistics are needed .Similarly data about distant
places often can be collected more cheaply through secondary sources. The data used for this
study is mostly secondary data .The information regarding the financial data of the past five
years has been collected from the various website journals, websites like www.icici.com etc.
TOOLS USED IN DIVIDEND DECISIONS
Total dividends paid
 Dividend per share = --------------------------------------
Total number of shares in use
Net income – preferred dividend
 Earnings per share= -------------------------------------------
Weighted average shares holding

Net income – preferred dividend
 Return per share = ---------------------------------------------
Weighted average shares holding
Market value per share
 Price earnings = ----------------------------------
Earnings per share
 Profit after tax = Operating income×(1-tax rate)
 Net worth= Total assets-Total liability

LIMITATIONS:
Every research conducted has certain limitations. These arise due to the method of sampling
used, the method of data collation used and the source of the data apart from many other
things. The limitations of this study are as follows:
The data collected is of secondary nature and hence it is difficult to ascertain the reliability of
the data.
 The scope of the study has been limited to the impact of the dividend on the market
value of the firm’s equity. Others factors affecting the firm’s market value have been
assumed to have remained unchanged.
 The period of the study has been limited to only five years.
 The method of sampling used is ‘judgment sampling’ hence the choice of the sample
has been left entirely to the choice of the researcher. This has led to some amount bias
being introduced into the research process.

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A

MASTER OF BUSINESS ADMINISTRATION

Department of Business Administration

Title of the Project : DIVIDEND POLICIES

Student Name : MEKALA SAIKUMAR REDDY

Hall Ticket Number : 130420672146

Signature of the Student :

Signature of the Guide :

2 NEED FOR THE STUDY 2

3 OBJECTIVES OF THE STUDY 3

5 LIMITATIONS OF THE STUDY 5

Dividend is a portion of the company’s earnings to be a distributed to its shareholder , based

on his shareholders. According to the Institute of Charted Accounts of India” dividend is a

information in agency costs.

distribution as dividends among shareholders. It determines the division of earnings between

payments to shareholders and retained earnings.

represents the present value of those future expected cash flows.

organization has to take certain capital budgeting decision.

 To know the various dividend policies followed by the firm.

capital budgeting decision.

of the firm’s equity.

 To interpret the various theories of dividend with reference to their assumptions

purpose represent secondary data to the researcher.

TOOLS USED IN DIVIDEND DECISIONS

Total dividends paid

 Dividend per share = --------------------------------------

Total number of shares in use

Net income – preferred dividend

 Earnings per share= -------------------------------------------

Weighted average shares holding

 Return per share = ---------------------------------------------

Weighted average shares holding

Market value per share

 Price earnings = ----------------------------------

Earnings per share

 Profit after tax = Operating income×(1-tax rate)

 Net worth= Total assets-Total liability

things. The limitations of this study are as follows:

assumed to have remained unchanged.

being introduced into the research process.

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