Dividends and earnings trends of the shipping industry

Abstract

Dividends and dividend-related matters are much researched finance topics. Yet, despite the long way dividend research goes back (as early as the 1930s), and the renowned academics involved, there is hardly a credible dividend policy to be found. No dividend hypothesis has, since its inception, failed to stir up controversy, be it regarding its assumptions or real-life applicability. Bearing the past attempts of researchers in mind, we will not venture to establish a dividend model to help explain dividend behaviour. Rather, our work will consist mainly of observations of dividend trends and analyses of the dividend patterns of the Singapore shipping industry. The impact of dividends can be broadly apportioned between two parties, the shareholders who receive the dividends and the directors who recommend the dividend payments. Theoretically, directors should increase dividends when company earnings are promising and cut dividends in the other case. Is this practised in the real world? As a result of the trade-off between paying dividend and retaining funds for investments, is the dividend decision secondary to investments plans? And can dividends affect share prices even when the value of the firm remains the same with the dividend declaration?