Summary of Dividend Policy

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Omani firms use large dividend distribution to attract investors. However, investors are required to understand the differences in dividend policies between developed market and Omani companies before making their investment. Oman only has a 12 per cent flat tax rate on corporate income. It is made compulsory by Capital Market Authority (CMA) to have a dividend policy for all firms and unveil in the annual reports. The Western countries distribute dividends moderately in comparison to the Omani companies who distribute almost 100 per cent of their dividends. Firms failed to comply in accordance to the Code of Corporate Governance. The high dividend payout ratio in Oman may be attributable to the absence of taxes on dividends and therefore impacted on the dividend stability Government ownership, dividend signalling and relatively weak corporate governance propose that firms may experience stable dividend policies. While the absences of taxes, variability in cash dividend payment and high bank leverage may also propose that firms may experience unstable dividend policies. To calculate the ideal dividend policy, it is best to use earnings per share (EPS) and dividends per share (DPS) instead of total earnings. It is more appropriate to use per share data instead of average data.