The board of Pawson plc is considering changing from its current dividend policy of paying out what is left over from its available cash after making investments. The forecast dividends if the company continues with its current policy and the forecast dividends if it changes to the new policy are shown below.

Forecast dividend payments 1 If current dividend policy continues

Explain which dividend policy Pawson is currently using and the advantages and disadvantages of the policy. Explain which policy is being employed in the new proposal and explain the advantages and disadvantages of the policy.

2021 2022 42 2023 474 2024 484 364 Year 2020 Dividend 204 per share (pence) Forecast dividend payments 2 - If new policy is employed Year- 2020 2021 2022 2023 2024 Dividend 204 254 314 per share (pence) 392 482