Dividend policy and portfolio size – Swedish listed companies 1912–1978

The purpose of dividends is to distribute income to shareholders. Many stock market investors have only a few shares in their portfolios. For these investors, selling one share to generate income is not an attractive alternative to receiving dividends. We describe the dividend decision process in Sweden and provide detailed analysis of how Swedish listed companies manage dividends around new issuance of shares and stock dividends. We also examine how companies facilitate financial planning for shareholders by separating special and regular dividends, decomposing annual dividends into interest and profit, and smoothing dividends relative to earnings.