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A business with a stable dividend policy pays out a steady dividend every given period, regardless of the volatility in the market. The exact amount of dividends that are paid out depends on the long-term earnings of the company. The dividend's growth is in line with the company's long-term earnings.
On the other hand, stock dividends are in the form of more company shares. For example, when a company announces a 10% stock dividend, it means that an investor with 100 shares is eligible to get ten shares as a stock dividend. Therefore, the investor will now have 110 shares. Cash dividends are taxable.
Under the constant dividend policy, a company pays a percentage of its earnings as dividends every year. In this way, investors experience the full volatility of company earnings. If earnings are up, investors get a larger dividend and if earnings are down, investors may not receive a dividend.
Dividend per share is the company's total annual dividend payment, divided by the total number of shares outstanding.
2. Stable dividend policy. Under the stable dividend policy, the percentage of profits paid out as dividends is fixed. For example, if a company sets the payout rate at 6%, it is the percentage of profits that will be paid out regardless of the amount of profits earned for the financial year.