Dividend policy in purposeful companies The Purposeful Company Steering Group

Dividend policy in purposeful companies The Purposeful Company Steering Group December 2020 Dividend policy in purposeful companies 1 About The Purposeful Company The Purposeful Company was established in 2015 with the support of the Bank of England to identify changes to policy and practice to help transform British business with purposeful companies committed to creating long-term value through. [...] Raising the dividend is a credible signal, because only if the firm’s future is truly rosy will it be able to sustain the new dividend. [...] The dividend reduces the “baseline” level of the stock price; future changes are now off a lower base so the dividend has a permanent effect. [...] Keeping the money in the company is risky – the stock price is affected by many other factors. [...] Indeed, just as the investment community – even before the pandemic – played a major role in encouraging companies to stop quarterly reporting to allow them to focus on the long-term, it can play a similar role in enabling companies to be flexible with their dividend policy.