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Sample Essay – Dividend policy of Centrica

This coincided again with the peak of the impact of the financial crisis when most companies were finding it difficult to access capital as well as liquidity as banks themselves were closing down and the markets had gone bust. That dividend level persists till today as well. However, the dividend growth rate has been steady and mostly in line with the growth in Earnings per share for the past five years. In some cases dividend was even higher than the growth rate offered by the EPS.

The dividend policy of Centrica is one of value creation for the investor. It can not be made irrelevant as in a perfect market by the MM proposition as the market is not perfect nor do the assumptions stand. Furthermore, energy sector is heavily dependent on certain successes which may not be fully replicable by the investor and hence a stable dividend may be required to the investor to prompt continued investment which may be easier considering the number of successful wells being milked by the company at present and the recent spikes in the oil prices leading to significant rise in profits.

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