Declaration of Dates
This is the specific date by which the board of directors intends to make dividend payments in cash. This date is usually announced prior and the payments are made in quarters. This date's official announcement is fundamental since it serves as a guarantee for payment by the particular company. During the same sitting, the board of directors declares the date of record and the precise date of payment as well (Schellenger & Tashakori, 1989). The board also agrees on the amount payable to each stakeholder and the aggregate amount.
Reviewing the company's documentation to evaluate any restrictions
The board of directors is (BOD) supposed to go through a corporation's documentation, both soft and hard copies, to ensure that that particular corporate's governing documents allow them to distribute the cash dividends. If the BOD discovers any prohibition, the cash payments are put on hold until the issue is settled. In instances where the corporate is indebted, the BOD could opt to pay off the debts instead of giving cash dividends to the shareholders (Bradford et al., 2013). That could generate huge profits and earn the company even higher dividends in consecutive years.
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Board of directors discretion
The BOD analyzes a company's earnings, profits, and losses. They consider the corporate's objectives and development plan before giving out the cash dividends t since the dividends are not usually guaranteed, especially if the payment would jeopardize the company's financial goals (Bradford et al., 2013). However, the BOD also considers the shareholders' interests since they are the corporation owners and processes the payments in a reasonable manner that would be fair to the shareholders. The dividends are usually paid from the annual net profit. Therefore, if a particular year records low profit, the dividends are down-scaled, which calls for an evaluation of financial setbacks by the stakeholder.
References
Bradford, W., Chen, C., & Zhu, S. (2013). Cash dividend policy, corporate pyramids, and ownership structure: Evidence from China. International Review of Economics & Finance , 27 , 445-464.
Schellenger, M. H., Wood, D. D., & Tashakori, A. (1989). Board of director composition, shareholder wealth, and dividend policy. Journal of Management , 15 (3), 457-467.
