If Laiho increased its dividend payout ratio, what effect would this have on corporate taxes paid? What effect would this have on taxes paid by the company’s share- holders?.

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16-03-2022
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If Laiho increased its dividend payout ratio, what effect would this have on corporate taxes paid? What effect would this have on taxes paid by the company’s share- holders?.

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deebikamadhivanan deebikamadhivanan · Answer 1 · 2022-03-23T15:21:30+01:00

The dividend payout ratio (DPR), also known as the payout ratio (PR), depicts the percentage of a company's earnings distributed to shareholders as dividends.

What are dividends and their importance?

The first is a rise in the company's net profits, which are used to pay dividends.

There is more room to pay higher dividends to shareholder

A dividend increase is a favorable indicator of firm performance in this context.

According to the tax preference theory, some investors prefer long-term capital gains to present dividend yield and will pay more for a company's stock if it reinvests its earnings in capital-appreciating projects rather than giving them out as dividends.

A high DPR indicates that the company is reinvesting less in its business while paying out a higher proportion of its earnings in dividends.

Income investors choose such companies because they guarantee a constant source of income over a strong potential for a share price rise.

For more information about dividend payout, refer below

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