Assistant Professor Dr. Thulasi Krishna. K
Department of Management Studies, Madanapalle Institute of Technology & Science,
Madanapalle, A.P., India
Email: [email protected] & [email protected]
Assistant Professor Dr. R. Vara Prasad
Department of Management Studies, Madanapalle Institute of Technology & Science,
Madanapalle, A.P., India
Email: [email protected] & [email protected]
Associate Professor Dr. R. Varadarajan
Department of Management Studies, Madanapalle Institute of Technology & Science,
Madanapalle, A.P., India
Email: [email protected]
Doi:10.23918/icabep2018p2
(Full Paper)
Abstract
The dividend is a part of the profits of a company, which is distributable among its shareholders according to the decision taken and the resolution passed in the meeting of the Board of Directors. Dividend policy of a company sets the guidelines to be followed while deciding the amount of dividend to be paid out to the shareholders. The company needs to adhere to the dividend policy while deciding the proportion of earnings to be distributed and the frequency of the distribution. Because the payment of the dividend will have a considerable impact on the market price of the share as propounded by Walter and Gordon under relevance theories of dividend. Further, the investors may rely on various analyses, such as fundamental and technical analyses for their investment decisions. In this context, an attempt is made in this study to find out whether the cost of capital can be helpful in predicting the investors’ expectations using Walter’s and Gordon’s Dividend Models by selecting companies from financial services. The study reveals that the Overall Cost of Capital (Ko) is not a good predictor of the market price in case of financial services companies.
Keywords: Dividend, Cost of Capital, Earnings per Share, Market Price
ISBN 978-0-9962570-9-1
Faculty of Administrative Sciences and Economics
Tishk International University
