A Critical Review of Dividend Theories

Modiglian and Millers’ thinking on dividend policy revolutionizes the evolutionary dividend puzzle and builds up on what scholars inaugurated about six centuries ago when first joint stock companies dividend earnings history was all about sharing proceeds from voyages where parts were bought or sold by Captains in the open market. Later in the 16th century shares were invented and traded in denominations by various captains. Many scholars have since packaged the dividend argument into various theories of dividend. However, indecisiveness is witnessed on whether to eat the ‘seed’ or secure dividends from retained earnings and the impact this has on value of the firm. The puzzle continues to be a conundrum to many researchers of modern times. This paper tries to underscore dividend theories analytically and zeroes in elaborately on Modigliani-Miller and Lintners’ bird at hand theories from which all other theories of dividend dra