Table of Contents
1.0 Introduction 2
2.0 Dividend Irrelevant Theory 2
3.0 Company Listed at Bursa Malaysia 3
3.1 Zelan Berhad 3
3.2 FACB Industries Incorporated Berhad 4
3.3 Carlsberg Brewery Malaysia Berhad 5
3.4 Axiata Group Berhad 6
4.0 Others Factors Affect Dividend Policy 7
5.0 Impact of Tax on Dividend Policy 8
6.0 Conclusion 8
7.0 References 9
8.0 Appendix 10
Company may return to their shareholder by paying dividend or repurchasing back the shares. A company may pay a generous dividend and knowing that it will have to schedule new stock issue to raise cash for investment. Otherwise, it will pay no dividend instead use cash to ...view middle of the document...
It means that the value of a company will not affect before and after dividend payout. Because when a firm paying dividend, it may get extra money from somewhere, but a firm can't continuously sell it share when it assets and earning are unchanged therefore it only will be a transfer of value from old to new stockholder. It means that the new shareholder get newly printed share worth lesser than before the dividend declare and the old shareholder suffer a capital loss on their existing share. Then the capital loss will be offsets the extra cash dividend they received. The only change is the value of each share it must worth less than before dividend declare. Therefore, in order for the old shareholder to get extra cash they can sell their share to the new shareholder. In conclusion that, the investors actually no need to get the cash through dividend payout, therefore the dividend payout policy is irrelevant. (McGraw Hill Irwin, 2010) If according the theory state by middle-the-road party, the irrelevant theory only can apply on perfect market. In real world, there is no such thing perfect, all things incurred cost. Therefore in my opinion, the company will not issue share every time when they declare dividend, since it will be also a lot of cost incurred and it also need to go through a lot of process. So that, the existing shareholder will not always worried about the dividend earn by them will spend to cover the loss suffer in terms of share price drop. Besides that, a company can also borrow money from financial institution and other party to cover the cash outflow in terms of paying dividend other than increase the share number. As a conclusion, the dividend policy of a company will be relevant to their existing shareholder.
3.0 Company Listed at Bursa Malaysia
3.1 Zelan Berhad
Zelan Berhad is an investing holding company incorporated since 1976. It principal activities comprise construction of power plants and buildings, property development, civil engineering and building turnkey contractor and etc.
There was no dividend has been declared by the company since 2011 financial year end until 2012. In the financial year end 2011, the reason due to the Group experienced tight financial constraint due to significant drop in revenue (FYE 2010: RM 1,019,987,000; FYE 2011: RM 41,417,000) resulting in a weak cash flow situation (FYE 2010: RM 43,946,000; FYE 2011: RM 16,632,000). It was because most of the overseas projects have experienced cost overrun (E.g: Rembang Project in Indonesia) since material price escalation and difficult operating environment. To ensure the shareholder's value is restored, many drastic measures such as reducing operation cost have been implementing in order to radically improve the way Zelan Berhad does the business. [Zelan Berhad Annual Report 2011] (Appendix 6)
For the financial year end 2012, although the revenue of the Group have increase from FY2011 (RM 41,417,000) to FY2012 (RM187,066,000) and the...