Does Dividend Policy Matter? Dividends matter-the value of the stock is based on the present value of expected future dividends Dividend policy may not matter o Dividend policy is the decision to pay dividends versus retaining funds to reinvest in the firm In theory,if the firm reinvests capital now,it will grow and can pay higher dividends in the future 66 Does Dividend Policy Matter? n Dividends matter – the value of the stock is based on the present value of expected future dividends n Dividend policy may not matter q Dividend policy is the decision to pay dividends versus retaining funds to reinvest in the firm q In theory, if the firm reinvests capital now, it will grow and can pay higher dividends in the future