Topics: Stock market, Dividend, Stock Pages: 1 (330 words) Published: March 7, 2015
SUBJECT:Proposed Cash Dividend Policy

Here is the review of your proposal to ease fluctuations in Marrud’s market price per share through declaration and payment of periodic cash dividends.

I believe that it will not attain its intended purpose as it (1) places further pressure in our dwindling funds that may compromise our future expansion and acquisition plans; (2) might give investors the wrong signal that we cannot find robust investment opportunities anymore; and (3) exposes us to the risk of defaulting promised periodic dividends. These might aggravate our problems instead on solving them.

I strongly advise that we postpone the issuance of dividends until such time that we can see a sustainable cash flow and establish a stronger position in the market. I am proposing that we use the cash to pursue our planned expansion and diversification projects. As our coffers run low, we need every single dollar that we can save to further our plans.

More importantly, most of our shareholders are growth investors – sixty percent of the individuals who purchase shares in 1961 still held at least the number of shares they had bought initially. Hence, I am positive that our stockholders will prefer keeping their investments in our company for promises of future value appreciation than receiving short-term gains through cash dividends.

The key to success and market domination in the retail industry is by acting fast. The field becomes more competitive these days as more players come in. So in response, our strategy involves widening our reach and increasing our market share to maintain profitable operations. Through diversification of our product offerings, we reduce our dependency on a few segments and spread overall risk. But things aren’t as good as what we intend. Cash availability becomes a more pressing concern as our liquidity worsens. Our debt levels continue to swell, but our profitability drops. The public seems to sense the gravity of our...
Continue Reading

Please join StudyMode to read the full document

Become a StudyMode Member

Sign Up - It's Free