Dividend Stocks To Take Shelter In

Dividend policies are generally driven by the needs of the business. The stage of maturity of the company can play a role. Younger companies, which are still growing, could prefer to deploy capital in acquisitions and expansion opportunities. Dividend policies also often differ based on tax regimes. If the tax regime is favourable, controlling shareholders could decide to distribute themselves dividend rather than pay salary.

In environments where bank funding is easy to get, companies can be more generous in paying dividends as they can turn to banks for their funding needs. This can be country and company specific. So, for example, Indian companies may choose to conserve capital rather than pay dividends because liquidity in the banking market is limited. We see a similar situation developing in China now that banks are no longer following expansionary lending policies. Companies in China may have to increase their internal funding once access to bank loans diminishes.

Source: Finance Asia

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