Abstract

Risks and uncertainties are inherent in every organisation. Different class of investors in do not shoulder the same degree of risk. An investor in bonds earns return in from interest while shareholders depend on dividends, stock price appreciation. Dividend refers to the distribution of profit among the shareholders. Profit earned by a company can be retained for future usage, or distributed in form of dividend or both. Dividend decision is one of the important decisions, since it determines the amount of profit to be distributed among shareholders and the amount to be retained earnings for future investment purpose. This is known as Dividend Policy. The main objective of every company is to maximize shareholders wealth rather than profit. Shareholders gain both from Dividend as well as Capital Appreciation. Moreover, dividend policy of a company has an impact on its market price. Market price increases only if a company provides stable return to its shareholders. This paper focuses on the impact of dividend on Market Price of a company.