Adjustments in anything cause changes. Changes can be positive or negative. Some positive changes that will arise by Progressive Corporation using another policy will include: the company is used to operating in a certain way and introducing a new policy will mean it finding ways of informing the public, shareholders and even investors on the new policies and this will take time as people are different and they will take a longer time to understand. The employees will have to be trained on the new operations, consuming valuable man-hours that could have been put into better use.
If the Progressive Policy has and continues to do well, then there is no need for the company changing it by stretching its’ budget and incurring unnecessary expenses. On the other hand, introduction of another policy may be beneficial because some people may think that the Progressive policy is far more complicated and a simpler policy incorporating some aspects of the progressive policy should be used. The technical jargons used may be difficult for the average shareholder to be able to comprehend and due to their lack of knowledge and interest they will not be clearly educated and advised on how their shares are doing.
It will therefore be good if the partial owners of the business feel they are a part of the organization if better policies are in place. In addition to this, another dividend policy used by other corporations may be working far much better than this one and it will be wise to adapt such a policy. Another dividend policy that deals on just a one year basis may be good as they will start concentrating on what will be good for the business now rather than engage most of their time on what lies in the future and negating the current situation.
Conclusion Most managers believe the best dividend policy is one that minimizes the weighted average cost of capital hence; companies do not mess with their dividends. “The chosen policy should be able to provide stable payments, maintain investor confidence and give good signals to investors about the ability of the firm to maintain and increase its wealth. It should be conservative enough to hold the uncertainty of future payments to a minimum (Groppelli & Nikbakht, 2000).
” Cyclical firms should pay low dividends regularly and an extra income when economic conditions are favorable and profits are high. References Carlson, C. B. (2006). A progressive dividend policy. DRIP Investor, 15(5), 1 – 8. Groppelli, A. A. & Nikbakht, E. (2000) Finance- 4th Ed Published by Barron’s Educational Series Hobson, R. (2007) Shares Made Simple: A Beginner’s Guide to the Stock Market Harriman House Limited Jeff Madura, J. (2008) Financial Institutions and Markets-8th Ed. Cengage Learning EMEA