Explain the following as factors affecting dividend decision:
(i) Stability of earnings; 
(ii) Growth opportunities; 
(iii) Cash flow position and 
(iv) Taxation policy

(i) Stability Earnings: Other things remaining the same, a company having stable earning is in a better position to declare higher dividends. As against this, a company having unstable earnings is likely to pay smaller dividend.
(ii) Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings so as to finance the required investment. Thus in growth companies, payment of dividend will be less as compared to non-growth companies.
(iii) Cash Flow Position: The payment of dividend involves outflow of cash. Hence if the company is facing shortage of cash, they will pay less dividend. Hence cash flow position affects dividend payment.
(iv) Taxation Policy: The choice between the payment of dividend and retaining the earnings is affected by the difference in the tax treatment of dividends and capital gains. If tax on dividend is higher, it is better to pay less dividends. If tax on dividend is less, higher dividends may be declared. Dividends are free of tax in the hands of shareholders but, a dividend distribution tax is levied on companies.