Three directors of a profitable listed company discussed their preferred dividend policies for their company.

1. Pay no dividends for the next five years.

2. Always pay a dividend of 50% of earnings after taxation.

3. Maintain a low but constant dividend per share (after adjusting for the general price index),and offer regular scrip issues and shareholder concessions.

Each director is convinced that his policy will maximise shareholder wealth.

Q1.Discuss the advantages and disadvantages of the alternative dividend policies for the company.