DIVIDEND POLICY

Critical Analysis: Dixons' Dividend Policy

Critical Analysis: Dixons' Dividend Policy

Introduction

This paper is elucidating upon the dividend policy of Dixons Retail, Plc. Dixons was a retail store got established in U.K., in the year 1937. The retail store sells white goods, telecommunication equipments and I.T. solutions. However, in the third quarter of 2012, the company got closed from U.K. and restricted its sales to Ireland. Coming back to the topic, the company has faced significant ups and downs during and after the period of World Wars and this is merely the reason that the company was unable to provide regular dividends to its stakeholders. The further analysis of the policy of Dixons dividend distribution is discussed under the following heading.

Dixons Dividend Policy

The dividend policy of Dixons is principally “Irregular”. There are various reasons behind maintain an irregular dividend policy for Dixons retail, plc. However, most of the reasons are associated with the administrative factors of the organization (Arnold, 2012, pp. n.d.). The foremost reason behind irregular policy is the uncertain earning of the organization. Soon after the great consecutive impacts of two World Wars, the organization has gone shake and a great fluctuation in the business performance of the organization has recorded (Jiraporn, et al. 2006, pp. 32). Thus, the policy makers of the organization had decided to adopt an irregular dividend policy to synchronize it with the profits and losses of the organization.

Moreover, during the world war era, the company has liquefied various resources for which the company had to made amendment in its financial and business model to secure income as much as possible. After 1945, Dixons got afraid of paying back regular dividends. A research has shown that the company has provided dividends till 2008, up till four years before its closure. The table 1 given below demonstrates that the company has provided an irregular dividend in 2007 and 2008.

Dividend Record

Type

Ex-Dividend Date

Payment Date

Amount (%)

Prelim

13/08/08

26/09/08

3.43

Interim

12/12/07

25/01/08

2.02

Prelim

22/08/07

28/09/07

6.85

Table no. 1: Dixons Retail Plc - Dividend Records

This table has clearly demonstrated that the company has offered different degree of dividends at different point of time, which principally elucidate its irregular dividend nature. However, there are various strengths and weaknesses of following the irregular policy; however, it is more or less like a gamble that either the company would play on shareholders' psyche of upon its self interests.

Selecting this Particular Policy

As mentioned above, there are various reasons behind selecting this particular policy. The main reason is principally the uncertain profits for the business, in decade of 1940s and 50s, the business has faced serious financial crisis, which resulted in the initial financial crisis for the business (Jiraporn, et al. 2006, pp. 27). The investors were quite disappointed at the time business has just started to generate revenue, because soon after the opening of the business the world has moved into the First World War. This great fiscal crisis actually made the organization to adopt irregular dividend policy in order to maintain equilibrium between the profit and the dividend need to be ...