Theories & Further Information about Dividends Payable

When it's considering how much of its profit to pay in dividends, the company is up against various conflicting interests. The shareholders clearly want a share of the profit in return for their investment in the shares, but they also (unless they're very short-sighted!!) want the company to grow in the future. To grow in the future, the company needs to invest a proportion of the profit. Whatever is invested can't then be paid to shareholders as dividends.
It is the job of the Board of Directors to try to take account of all these conflicting interests and to decide on the level of dividend they are going to recommend is paid. This recommendation is then considered at the Annual General Meeting of the company. The Directors should be in the best position to decide what needs to be re-invested and therefore how much can be spared to be paid out as dividends.

For more detail about how much of its profit a company is paying out in dividends, shareholders or potential investors could look at the DIVIDEND COVER or the DIVIDEND YIELD RATIOS. There is more detail on these in the reported earnings per share and the reported dividend per share pages.