Dissertation: Impact of Dividend Policy on Tesco's Investment Level

This dissertation investigates the impact of dividend policy on the investment level of firms, focusing on Tesco as a case study. It highlights the importance of effective financial management and dividend policies in attracting investors and enhancing organizational performance. The research aims to understand the concept of dividend policy and its influence on investment activities, using both qualitative and quantitative research methods, including a questionnaire-based survey to gather primary data. The study reviews relevant literature, discusses various dividend policies such as stable and progressive policies, and analyzes data to determine the correlation between dividend policies and investment levels. The findings contribute to understanding how specific dividend policy practices can attract investors and improve market growth.

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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and dividend, but believes the underperformance to be a one-time occurrence, it may still make a
payout to investors by either digging into its cash reserves or borrowing money.
There are various kind of dividend policy are considering by the organization such as stable
dividend policy, in this policy The largest and most commonly utilized dividend policy is a
stable dividend policy. The policy's purpose is to provide a stable and accurate dividend
distribution year after year, which is what most investors want. Investors receive a dividend
regardless of whether earnings are up or down. The main idea is to realign the payout policy
with the company's long-term development rather than the volatility of quarterly earnings. This
process offers the shareholder more assurance about the payout size and timeliness (Faulkner and
García-Feijóo, 2020)
Second dividend policy is progressive dividend policy, this is a prominent investment
strategy since it basically ensures larger payouts each year regardless of the company's
performance. However, when a corporation has a progressive payout policy and is failing,
questions about how sustainable the strategy is and the logic for sprinkling cash on shareholders
when it doesn't have the resources to do so can be asked. A industry's share price can be
supported if it shows it can offer a progressive distribution over time, but it significantly limits a
firm's flexibility if business operations deteriorate.
Another dividend policy is also utilising by the organisation like Share buyback ,A share
repurchase is the second choice for providing a payment to shareholders. A share buyback (also
known as a share repurchase programme) is when a corporation buys back its own interests from
investors at a pre-determined price, which is usually close to current share price. Rather than
paying investors a dividend, a company can decrease the number of shares in issue, increasing
the value of each share remained in the organisation.
Impact of dividend policy on investment level of Tesco
According to the Joshua Warner , ( 2019), it is revealed that the annual report is the best
place to look for a fixed rate of return. There will be a specific section that describes the details if
a policy is in place. If available, details on share buyback programmes or scrip alternatives will
most likely be found around their own parts nearby. On their investor relations website, larger
companies frequently offer a dividend section. This focuses primarily on the payment of
dividends that have already been announced. Dividend policies enable investors a distinct path
for the future and let the marketplace know what to expect. A corporation commits to making
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some type of return to shareholders on a regular basis by adopting a policy. Providing dividends
on time indicates that a company is accomplishing its objectives, but if it fails to do so,
shareholders may be eager to switch the business off.
It is vital to keep in mind that firms aren't obligated to pay dividends to shareholders, and that
payouts can quickly become susceptible. If a company's financial situation is deteriorating and it
wants to cut costs, the dividend is a good place to start. The investment decision is a decision on
how to allocate assets, both internally and externally, as well as how to employ funds for short-
term and long-term purposes (HOANG, 2020)
In the accounting functions of a corporation, the investment choice is critical.
According to Verawaty et al (2016), the firm's worth is totally defined by the investment
strategy. The viewpoint might be understood to mean that the investment decision is critical
because the company's purpose of maximising shareholder wealth can only be achieved through
capital markets. The calculation of the percent of the organisations net income delivered as
shareholder dividends is a choice relating to the fixed rate of return. Dividend policy is an
essential policy problem that the management firm should examine mature, because dividend
policy would include the interests of stocks with dividend income as well as the property of the
organization holdings. In essence, the dividend policy determines how much revenue is dispersed
as dividends to shareholders and how much profit is kept for development.
Dividend investing is a method which provides investors with two contributing factors financial
gain: periodical dividend payments and stock capital gain over time. Investing in dividend stocks
can be a good way for investors to earn revenue or grow their wealth by reinvesting dividend
payments. Purchasing dividend stocks is a technique that can attract to investors seeking prices
decrease. Dividend-paying stocks can be among of the least volatile to own. However, there are
still dangers to be aware of & dividend stocks might be dangerous if you don't know what to
avoid (Irawan and Suryati, 2021).
.Dividend policy is on proving the direct impact on the investment level of the organisation
so that company can appropriately maintain their effectiveness of the company. With the help of
dividend policies , organisation can appropriately maintain their terms with their stakeholders
and shareholders so that people can improve the involvement of their shareholders in their
business.
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Dividend-paying stocks allow investors to really get paid even when the market is volatile and
capital gains are difficult to come by. They are a good investment vehicle, especially when they
expand over time. Unlike other sources of income, such as interest on capital investment, they
are tax-advantaged. Dividend-paying companies are less volatile than non-dividend-paying
stocks on average. And a steady supply of dividends, especially when reinvested to take
advantage of compounding, can help you generate significant wealth over time (Iriobe Grace,
2021). Dividends, on the other hand, come at a price. Dividends to shareholders cannot be paid
without influencing the company's financial performance.
Effective dividend policy and practises that attract and cater larger number of investor and
shareholder
According to the ROBERT C. KELLY, (2021), defined that fundamental key
consideration when deciding on a dividend policy is the goal of increasing shareholder value.
Thus, if a company has viable financing options that provide a better rate of return than the cost
of retained earnings, it should keep the earnings rather than paying dividends. It can suggests that
retained earnings should be treated as the active decision variable, while dividends should be
treated as the inactive residual. In fact, however, we discover that most companies decide the
number of dividends first, as an active decision variable, and then keep the remainder. In fact,
firms do not have a choice between paying dividends and investing. Some specific dividend
policies are helpful to improve the growth rate of the organization & also useful to improve the
work effectiveness of the organization & their employees (Juliarti and Sumani, 2020). There are
various kind of dividend policies such as Residual dividend policy, Stable dividend polic,
Regular dividend policy
Irregular dividend policy & also No dividend policy. All these dividend policies are
helpful to maintain the dividend practices so that companies can implement these policies and
practices in order to attract the large number of investors & shareholders. The main concern of
dividend policies and practices is to improve the participation of t
The stakeholder and shareholder so that they can actively participate in the regular
activities of the organisation and also demonstrate their interest in the operational activities of the
company. Dividends are the transfer of a company's balance sheet to its shareholders based on
the number of common shares. Profits are kept by some corporations as retained earnings, which
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are intended for reinvestment in the business and its development, resulting in earned income for
investors.
Shareholders want earnings to be returned to them by the firms they invest in, but not all
corporations do. Growth firms frequently keep their earnings, whereas more mature corporations
pay dividends (Karlsson and von Renteln, 2021). For instance, investors seeking a consistent
income stream are more likely to invest in bonds, which do not fluctuate in interest payments,
rather than dividend-paying stocks, whose underpinning price can fluctuate. As a result, bond
investors are unconcerned with a company's dividend policy because their bond investments'
interest payments are fixed.
Another justification opposing dividends is that paying out low or no dividends is better for
investors. Supporters of this approach point out that a dividend is taxed more heavily than a
capital gain. 12 The argument against dividends is based on the assumption that a corporation
that reinvests funds (rather than paying out dividends) is more profitable.
Research objectives
 To evaluate about the concept of dividend policy.
 To determine about the impact of dividend policy on investment level of a Tesco.
 To investigate about some more effective dividend policy and practises that can be
adopted by the Tesco to attract and cater larger number of investor and shareholder.
Research Questions
 What is meant by the concept of dividend policy?
 What the possible impact of dividend policy is being seen on investment level of a
Tesco?
 Which can be some more effective dividend policy and practises that can be adopted by
the Tesco to attract and cater larger number of investor and shareholder?
Description and justification of the method used to gather and analyse data
Research Method
The research method acts as a guideline for project completion in the most efficient way
possible. The research method is beneficial in finding sufficient data from the community. The
researcher employs two variants of research methods, which are explored below -
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 Quantitative Research - To acquire data from the targeted audience, this strategy relied
on numerical data and figures. This method used a deductive strategy to acquire data
from the population, that can aid in maintaining the research's validity inadequacy. There
are a variety of ways to obtain qualitative data, including questionnaires, surveys, and
online surveys. Qualitative research is also taken into account for the current study
because it can help maintain the information's reliability (Mota, 2020). With the help of
quantitative research, it will make more possible to generate the numeric data in an
systematic manner so that researcher can appropriately improve the awareness about the
general prospective of the participants so that researcher can easily identify the best
results.
 Qualitative Research - This type of research strategy is beneficial in maintaining the
research's quality. Qualitative research can also be used to gather high-quality
information. The qualitative technique is an inductive approach that uses a variety of
resources including observation, discussion, phone interview, and others to produce the
highest quality information possible. To conduct the present study, the researchers used a
qualitative research method, which can help to retain the data and information quality
(Murniati, 2019). The main concern of this kind of research method is to focus on the
quality of the research so that researcher can deliver the effective knowledge which are
beneficial for the people so that they can eaisly consider their study for the further
research purpose. The prime motive to use qualitative research is to regulate & maintain
the good research knk
Data Collection
Data collection is an essential research technique that can assist in obtaining the most
relevant data from the target audience (Nurhayati, 2019). Researchers can collect data using a
variety of ways, including primary and secondary data collecting. The following is a description
of all of these data collection techniques which are discussed below -
 Primary Data collection Method - This collection of data strategy is beneficial in
providing original and first-hand data while maintaining the information's relevance.
Observation, conversation, questionnaire, and survey are all methods that researchers
might use to get primary data. To complete the current study, a primary data collection
approach was considered, as it can assist in providing original and valid information that
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is relevant to the researcher. The key advantage of this data collection strategy is that it
can save time while still providing reliable information (Nurmalasari and Baskara, 2019).
 Secondary Data Collection Method - This method is conceived of as second-hand data
that has already been gathered and used by someone else. Publications, websites, articles,
newspapers, and articles can all be used to gather secondary information. This technique
is beneficial for providing in-depth knowledge and comprehension of the research issue
so that the researcher may easily gain relevant knowledge and apply that information and
knowledge to acquire relevant results. This is a more time-consuming procedure that
yields successful outcomes.
Research Philosophies
Research philosophy is concerned with both the origins, nature, and progression of
understand the basic. A research philosophy is a set of beliefs about the how evidence on a topic
should be gathered, analyzed, and utilized. Whereas the development of a knowledge production
may appear to be substantial, you are already doing it as part of your dissertation research. To
answer the research topic, researcher should collect secondary and primary data & conduct
analysis of the data, which also will result in the formation of new knowledge (Omar and
Echchabi, 2019)
 Positivism - This is considered as the Natural scientists' philosophical approach can be
seen in positivism, as their research is based on actual social entities. Data gathering and
assumption building are the foundations of research strategy. These theories will be
investigated and confirmed, and the results will be used in future studies. Additional
element of this theory is that positivist researchers use a properly organized technique to
aid hypothesis testing. Moreover, positivism is based on quantifiable observations, which
leads to statistical analysis.
 Interpretivism - Interpretivism is a philosophy of epistemology concerned with the
measurement of individual distinctions as social actors. The distinction between
investigating the reasons among individuals and conducting research on items such as
medications and computers is highlighted. This philosophy is based on social life & the
differences between it and the prior approach is that scientific methods are looking for
data reliabilities in order to derive "rules" from them. The understanding of social roles
has been provided in this philosophy with respect to one's own set of meanings.
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