Literature Review of dividend policy affect corporate earnings and profitability

            The research study conducted by Chinpiao Liu & An Sing Chen (2015) have provided deep insights regarding the dividend changes in the organization. The researchers stated that organizations keep on changing their dividend to signal profitability of the organization. Huge amount of data has been gathered to evaluate the dividend policy of the organization. The findings of the study stated that the corporations change their dividend to show increase in equity earnings rather than increase in the earnings related to assets. The dividends are also changes to show changes from past earnings. In addition the study have discussed negative impact on ROA from changing the dividend of the organization. The investors on the other hand did not realize the importance of the signaling and sometimes they unable to understand the whole process of signaling. This research study has huge significance for the future researchers because future researchers can utilize this study for further research (Liu and Chen 2015)

        Doron Nissim & Amir Ziv (2001) have provided brief information about the dividend Changes and future profitability. In the study the researchers have tried to develop and test the relationship between the dividend changes and their impact on the future profitability. The significant amount of data has been gathered for conducting the study. The hypothesis is developed to evaluate the dividend changes impact. The findings of the study stated that the dividend changes provide information about the future profitability of the organization. In addition the study have concluded that there is positive relation between the dividend changes and earnings of the corporation. In the study has vast scope because it provides information is detail and can be used by future researchers to investigate the impact of dividend policies over the profitability & performance of the organization (Nissim and Ziv 2001).

Critical Analysis of dividend policy affect corporate earnings and profitability

        Through evaluating the relevant literature it can be said that a lot of researchers have concluded that the dividend policy and the profitability of the organization have relationship with each other. The dividend policy do effect the profitability of the corporation. The studies have shown that through dividend policy one can evaluate the future profitability of the organization. In various studies it has been identified that the organizations change their dividend so that they can signal increase in the earnings of the corporation. Therefore the dividend policy have significant impact not on just profit but also on various operations of the corporation.

        Through literature review it can be said that the dividend policies remain important for the corporations because they are related with the investors and their profitability. The investors invest in such corporations which provide significant amount of return on their investment & allow them to maximize their wealth. If the organization is going to provide low dividend to the shareholders than the corporation might face criticism from shareholders and in future it might face problems in generating funds through equity. Therefore the organizations try to provide a significant amount as dividend to the shareholders (Higgins 2007).

        Sometimes high amount of dividend decreases the profitability because a significant portion of the profit is paid to the investors as dividend. Through changes I dividend one can determine increase or decrease in the future profitability. When the amount of dividend increases it means that the corporation is generating significant amount of profit and in future the profitability of the corporation will increase. When the dividend amount decreases the investors think that the operations of the corporation starts facing issues which become the reason in decreased profitability. The first thing that comes in the mind of the investor when dividend decreases is that the corporation profitability has decreased (Atrill 2014).

Kellogg’s Description of dividend policy affect corporate earnings and profitability

        Kellogg Corporation is a multinational organization which has presence in parts of the world. It is an American corporation who is serving in the food processing industry. The head quarter of the corporation is located in the city of Battle Creek USA. Kellogg Corporation produces many products which include cookies, cereals, Crackers and vegetarian food. The major brands of the organization include Pringles, Sunshine Biscuits & Garden Burger. The organization was established in the year 1906 by Will Keith Kellogg. The organization is listed in the New York Stock Exchange (NYSE) and it is the component of the S&P 500. According to the statistics of 2016 the corporation has employed 33577 employees. The corporation has manufacturing facilities in almost 18 countries. The largest factory of the organization is located in United Kingdom. Over the years the organization has experience immense growth and immerge as a major corporation in the world. The corporation due to its strong marketing strategy has become a major brand and made an image in the mind of the customers (Morningstar 2018).

References of dividend policy affect corporate earnings and profitability

Atrill, Peter. 2014. Financial Management for Decision Makers . 7. Pearson Higher Ed.

 ." 7 (8): 542-546.

Liu, Chinpiao, and An-Sing Chen. 2015. "Dofirms use dividend changes to signal future profitability?A simultaneous equation analysis." 37: 194-207.

Morningstar. 2018. Kellogg Co. https://www.morningstar.com/stocks/xnys/k/quote.html.

Nissim, Doron, and Amir Ziv. 2001. "Dividend Changes and Future Profitability ." 56: 2111-2133.