Impact of Dividend Policy on Investment Level of a Firm: A Tesco Research Project

Dissertation

Abstract
On the basis of this research , it is determined that the impact of dividend policies on the
investment level of the organization so that organization can effectively invest on their business
operations in order to find out appropriate dividend. With the help of this research report,
researcher can effectively identify the need and importance of dividend policies & also discuss
about the various types of dividend policies so that all the organization can easily adapt these
policies and also implement the policies and practice so that company can appropriately improve
their market growth rate (Abrar, Ghazyla and Arisandi, 2019). This Research report also discuss
about the influence of dividend policies on the investment and other activities which are
correlated with the investment of the organization. This report also determined the some specific
dividend policy practices which can help full to attract the investors so that they can invest more
on the business in order to obtain the most possible results in context of effective dividend. This
report properly researches the specific research area and also topic and use qualitative and
quantitative research method in order to improve the relevancy and adequacy of their research
project. This report also conduct small scale research so that researcher can easily find out the
primary data as per to identify the genuine responses of respondents. With the help of
questionnaire method, researcher gathered the appropriate data and generated the first hand
information so that researcher can easily identify and also frame the most appropriate outcomes
through utilizing the respect stages to obtain the research aim and objectives.

Table of Contents
Abstract............................................................................................................................................2
Topic: The impact of dividend policy on investment level of a firm. A research project on Tesco.
..........................................................................................................................................................1
INTRODUCTION...........................................................................................................................1
Background of the topic.........................................................................................................1
Research Aim.........................................................................................................................2
Importance of the topic...........................................................................................................2
Review of the relevant literature sources.........................................................................................2
Concept of dividend policy....................................................................................................3
Impact of dividend policy on investment level of Tesco.......................................................4
Effective dividend policy and practises that attract and cater larger number of investor and
shareholder.............................................................................................................................6
Research objectives................................................................................................................7
Research Questions................................................................................................................7
Description and justification of the method used to gather and analyse data..................................7
An analysis of the data...................................................................................................................11
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................22

Topic: The impact of dividend policy on investment level of a firm. A research
project on Tesco.
INTRODUCTION
Background of the topic
For every firm and business organisation, having effective financial management is must to
ensure proper pursue of their set business goals and objectives that enhance their overall
performance level. Thus, investment and financial policies forms a vital part of every
organisation which supports proper inflow and outflow of funds to ensure improved success and
higher performance level. Dividend is regarded as the payment of money that is paid to
shareholders out of profitability after payment of whole expenses. It is the amount that is needed
to be paid for maintaining shareholder satisfaction (Abu and Adebayo, 2019). Entity gain higher
profitability but at similar time, they has to pay few amount as dividend so it would obtain
effective revenue from money that they invest within entity. Dividend policy is also among the
one of the most vital financial policy of a firm that reflects the amount of return that accrues to
shareholders as a result and benefits of the money that they invested in a firm for acquiring the
stock and share of a company. Thus, dividend policy is tending to base on the division of the net
profit after taxes between all the shareholders of the firm. The shareholders and investor are
highly enthusiastic and have interest in the dividend policy of a firm as it presents the outcome of
their investment. Thus, an analysis can be made that a crucial impact and influence is being leads
out by the dividend policy in attracting and catering a larger numbers of investor. Dividend
policy is concern with monetary policies related to paying cash dividend within present or paying
an enhanced dividend at afterwards stage.
Moreover, it is undertaken as the policy a firm utilises to structure their dividend payout to
shareholders. In addition to this, it is vital determinants of entity. Within organisation, de-tax
policy is difficult as this incorporates interest of various stakeholders. The intent of shareholder
investment is to develop their welfare through gaining return from invested capital (AlHares,
2019). As for the firm’s management is much oriented to enhance the values of business.
Additionally, the creditors’ required information upon dividend policy for evaluating as well as
analysing the returns probability that is to be gained if lending to entity. Essentially, the dividend
policy is regarded as the profitability portion which is to be giving to shareholders.
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The main aim of this report is to discuss the impact of dividend policy on investment level
of firm. The organsaition which is undertaken for this dissertation is TESCO; it is known to be
one of the growing British multinational general merchandise as well as groceries retailer which
having headquarters is in Welwyn Garden City, England. Moreover, it is also known as the third
and ninth largest retailer by gross revenues as well as revenues. It was founded in year 1919 by
Jack Cohen. Additionally, TESCO Plc is undertaken as association that have board shareholder
base and investment level as they have effective turnover as well as net value. It is performing
into around seven countries that are Europe, Hungary, Asia, Ireland and others. They are
conducting their business into software, books, electronic, clothing, petrol and many more. The
topics which are going to be coved in this report are research aim, research objectives,
importance of the project and literature review. Moreover, the research methodology and data
analysis are also performed in this report.
Research Aim
The main aim of current study is, “To get better understanding about the concept of
dividend policy along with analysing its impact on the investment level of firm”. A research
project on Tesco.
Importance of the topic
The main aim of choosing this report is to gain knowledge and understanding about the
concept and impact of dividend policy on investment level of a firm. As investment and financial
policies forms a vital part of every organisation which supports proper inflow and outflow of
funds to ensure improved success and higher performance level (Anh, 2019). Dividend policy is
also among the one of the most vital financial policy of a firm that reflects the amount of return
that accrues to shareholders as a result and benefits of the money that they invested in a firm for
acquiring the stock and share of a company. Moreover, this topic highlights various more clarity
through analysing the Effective dividend policy and practises that attract and cater larger number
of investor and shareholder.
Review of the relevant literature sources.
Literature review is considered as the crucial area which should be discussed that would further
aids in identifying appropriate guidance by help of relevant information. Moreover, it is
undertaken as one of the effectual portions of dissertation which would assists in performing
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deep investigation by that final conclusion might be attained precisely. In addition to this, it
would aids into explanation, summary, determination and elucidation of literature into efficient
manner (Barros, Matos and Sarmento, 2020). Additionally, respective dissertation section
includes research questions in which investigation would be executed in efficacious manner.
Also, respective part would be attained via by accumulating information by secondary sources
such as books, online sites, journals and others.
Concept of dividend policy
According to the JAMES CHEN, (2020), A dividend policy is the mechanism under which a
firm structures its dividend payouts to investors. In theory, according to some researchers, the
dividend policy is meaningless because investors can sell a percentage of their share or portfolio
if they need cash. The capital structure irrelevance theory states that dividend payouts have a
negligible impact on an organizations equity. While raising dividends is encouraging,
corporations that rely on borrowed money to make those amounts should be avoided. Consider
the utility industry, which used to entice investors with steady earnings and generous payouts.
Some of those businesses had to take on more debt since they were allocating funds to expansion
prospects while still trying to maintain dividend levels (Dalton and Pointon, 2019). Organization
containing a debt-to-equity ratios more than 60 percentage should be avoided. Higher debt
amounts frequently result in criticism from Wall Street & credit rating agencies. As an outcome,
a company's capacity to pay its dividends may be hampered.
Dividends are also essential since it can help investors determine how much a firm is truly
worth. The dividend discount model is a traditional formula that explains a stock's underlying
value. It is considered as a key component of the capital asset pricing model, which is the
foundation of corporate finance theory. A share is worth the sum of all future dividend payments,
"discounted back" to their net present value, according to the model. Dividends are a significant
aspect of a firm's profitability because they provide a type of cash flow to the investor. It is also
worth noting that dividend-paying equities are less likely to hit unsustainable highs. Investors
have understood for a long time that impact the effectiveness of the business. The amount of
money distributed to shareholders is determined by a dividend policy. When determining
whether or not to pay a dividend, a firm must examine its revenues and determine how much
should be retained in the organization to fund continued success versus how much should be paid
to investors. If it has had a bad year may not have enough earnings to meet its investment needs
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