DIVIDEND POLICY IN BULL AND BEAR MARKETS

Dividend Policy in Bull And Bear Markets

Dividend Policy in Bull And Bear Markets

In finance, a bear market is a market condition that occurs when stock prices decline or are going to fall. Figures vary, but if the price declines of 15 to 20%, the market is assumed, as the bear market. Some of the several indices, such as 500 Index Standard & Poor's (S & P 500) and Dow Jones, which are used to determine the bear market.

The term "Bear" was used in finance since the early 18 th century. One of the most famous bear markets in U.S. history was during the Great Depression of 1930. However, we will focus here on the trade in bear market. As already mentioned, the market bear means a period in which the investment decline in prices. However, if a period of declining prices is not a long time and it immediately follows a period when stock prices are on the rise, the trend is no longer considered as a bear market, but are labeled, in financial terms as a correction.

In general, the bear market resumes, if the government goes into recession, and if inflation is high. Trade in a bear market is extremely difficult and risky for shareholders. In the stock market, investors who are usually trying to profit from falling prices, known as bears. They are generally pessimistic about the state of the market. "Bear" thoughts can be applied to several types of markets such as commodity markets, bond markets and stock markets.

On the other hand, investors who think that particular share or the market goes down is called pigs. Stock market in some developed countries, the United States, for example, is unsustainable, as the bears, as well as their counterparts known as bulls fight each other to take control. U.S. stock market increased only by 11% annually over the past 100 years. This shows that each bear their losses.

Dividends are set by the Board of Directors of the company and may come in the form of cash or stock dividends. Instead, to keep revenue to expand or invest in growth opportunities, the firm's profit turns into dividends for shareholders. This means that the high rate of pay is often paid by mature companies with limited opportunities for further growth, while the zero to low ratio of benefits paid by younger firms, which expand and invest. This attitude can be found by dividing the number of dividends on profits. Dividends may also be classified as regular (paid on a regular basis) or extraordinary (to be paid as a one time occurrence with no obligations).

Although these dividends can come in the form of cash, they can also be offered as stock dividends. This type of dividend, however, can lead to erosion of capital and lowering the cost per share. Stock dividend is recognized as a transaction at the expense of retained earnings to equity. Redemption of shares is another form: the firm repurchases shares, which, unlike dividends, ...