Evaluate Sainsbury plcs financial strategy Essay - 1

Evaluate Sainsbury plcs financial strategy - Essay Example In spite of these speculations, it has risen to be the leader for the last two decades. Sainsbury has relied heavily on equity capital to finance its operations in the recent past. The management consists of the contributors of the needed capital. Being a company based in United Kingdom, where a company with more than 50% of its capital is considered highly geared, the management made a move in the year 2006 to incorporate high level gearing for the following reasons: This is another significant source of funds for Sainsbury Company. This dividend reinvestment plan allows stakeholders to reinvest their cash dividends through purchasing more shares in the market through a significant prearranged share dealing service. No new shares are allotted under this plan. It involves adding more value to the existing ones through a systematic way in order to achieve a balanced portfolio. The price and value of these shares fluctuate in response to the market waves. Stakeholders are fore warned of this possibility because the reinvested dividends in the form of shares may end up with a value or price that is less than the anticipated. Shareholders may then end up getting less than what they invested. Past performance is a guide to clear shareholders doubts and for those who are not sophisticated enough to understand the fir past performance are advised to seek the assistance of professional financial advisors. To aid in understanding of Sainsbury dividend policy, this paper acknowledges the importance of reviewing theories on dividend policies. With empirical research continuously being conducted by scholars on dividend policy, no consensus has ever emerged has scholars continuously keep disagreeing about the same empirical evidence. They all agree that dividend policy refers to management practices in making decisions on the criteria and amount of dividends to be paid to shareholders overtime. However, three dividend policy