In public owned sports business, high dividend payment strategy will suit the firm. This is because a sports company is an enterprise of high institutional ownership and offering a high dividend payout will help them to increase control over the management (Black, 1976, p. 5). I would offer high dividend payout to stakeholders because in most cases sports companies utilize their retained earnings and have no internal and external capital requirements. Offering high dividends despite depressing markets would help retain and attract potential shareholders to invest in the business. Gaining shareholders trust for adopting a strategy which values their interest is a milestone for founding a strong business base and a driving force towards mutual success. Companies that offer consistent and high dividends generate a lot of cash, have low levels of debts and a strong balance sheet.
High dividend and consistent payers have quality like strategies which are more of valuable strategies. Shareholders invest in companies that offer a high dividend pay as they are sure of an income stream to support their living and reinvest their dividends (Black and Scholes, 1974, p. 10). High dividend strategies would enable the sports business to be defensive and hence give investors downside protection. This kind of strategy would also offer a diversification benefit to invest in another market.
In choosing this strategy, I would consider the situation of the company and its strategies of increasing value. The need to achieve objectives should be taken into account as well as making the capital needs of the enterprise. The dividend issuance should be of relevance to the profits gained by the company (Fama and Babiak, 1968, p 1136). I’ll also consider supervisory and national regulatory recommendations in valuing the shareholders. Additionally, the stability of the dividend policy will be considered to ensure shareholders access returns on equity.
Black, F. (1976). The dividend puzzle. Journal of portfolio management, 2(2), 5-8.
Black, F., & Scholes, M. (1974). The effects of dividend yield and dividend policy on common stock prices and returns. Journal of financial economics, 1(1), 1-22.
Fama, E. F., & Babiak, H. (1968). Dividend policy: An empirical analysis. Journal of the American Statistical Association, 63(324), 1132-1161.