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Essay / Research Paper Abstract
This 10 page paper examines the dividend policy of the UK retail company House of Fraser. The paper starts by looking at the dividend history and policies of the company. The paper then considers models of behaviour that can be applied to investors that may explain different behaviour patterns. The last part of the paper than looks at how the dividend policy is used to satisfy the needs of then investors through tools such as dividend signalling and why this policy can be used as a defensive and a proactive tool for the benefit of the company. The bibliography cites 7 sources.
Page Count:
10 pages (~225 words per page)
File: TS14_TEfraser.rtf
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Unformatted sample text from the term paper:
issues of asymmetry and to satisfy investor demands. If we look at the House of Fraser there is a good illustration of how a dividend policy can be used both
defensively and proactively. The House of Fraser has followed a very stable and steady dividend policy. If we look back over the last five years, between the accounts for
years ending 1999 - 2003 each year sees the company issuing the same dividend levels. The levels for each year were 5.5 pence per share. Not only is the dividend
remaining the same but the payments split is also the same, with the final payment being 3.8 pence adding to the interim payment of 1.7 pence per share (House of
Fraser, 2000, 2001, 2003) This is a very interesting tactic as there may appear to be a care l and well thought out approach, less is paid as an
interim dividend so that there is scope for reduction when trading ties are harsh. But there is also the maintenance of the same level giving increased stability that supports the
share price. This policy may be seen as a part of the reason why the takeover bids have failed for this retail chain that many other companies have seen
as an easy target. The take-overs have been resisted with the support of many existing shareholders. If we look at why shareholders may react in this way by looking at
motivations models, then we can consider how the policy is appealing to the motivation of the shareholders. There have been different models of human behaviour proposed to explain actions
and reactions to different circumstances. Two models that are insightful for the behaviour of shareholders and investors are those of the Resourceful, Evaluative, Maximizing Model (REMM), and the Economic Model
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