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The following policies relate to three companies currently listed on the Uganda security

exchange. Each company has different dividend policies for its shareholders, for example,

o FUMEME pays all profits available for distribution to shareholders in the form of a cash

dividend each year.

o BUG Clays has yet to pay any cash dividends to shareholders and has no plans to make

dividend payments in the foreseeable future.

o BAX repurchases shares from shareholders as an alternative to a dividend payment.

o AXTELL offers shareholders the choice of either a small but stable cash dividend or a

scrip dividend each year.

Required:

a) Discuss the advantages and disadvantages of each of the above policies

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