A dividend policy is a company's structured plan for how it distributes earned profits to shareholders and how much it retains for reinvestment in the business.
A company's dividend policy matters greatly to shareholders because it affects both their investment income and the company's future growth prospects.
The main types of dividend policies are: Stable Dividend Policy (fixed or gradually increasing dividends each year), Constant Payout Ratio (a fixed percentage of earnings as dividends), Residual Dividend Policy (dividends from whatever remains after funding investments), and Zero Dividend Policy (all profits reinvested, no dividends paid).
In Bangladesh, companies listed on the Dhaka Stock Exchange pay dividends in cash or stock form according to their declared dividend policies.