A high dividend payment strategy will suit the firm in a publicly owned sports business. A sports company is an enterprise of high institutional ownership, and offering a high dividend payout will help it increase management control (Black, 1976, p. 5).
I would offer a 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 that values their interests is a milestone for founding a strong business base and a driving force toward mutual success. Companies that offer consistent and high dividends generate a lot of cash and have low debt levels and a strong balance sheet.
High dividends and consistent payers are more valuable quality 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 enable the sports business to be defensive and hence give investors downside protection. This strategy would also offer a diversification benefit to invest in another market.
In choosing this strategy, I would consider the company’s situation and its strategies for increasing value. The need to achieve objectives should be taken into account, as should the enterprise’s capital needs. The dividend issuance should be relevant to the company’s profits (Fama and Babiak, 1968, p. 1136). I’ll also consider supervisory and national regulatory recommendations when valuing the shareholders. Additionally, the stability of the dividend policy will be considered to ensure shareholders access returns on equity.
References
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.
