Factors affecting the dividend decision of a company are as follows:
(i) Retained earnings - Dividend decision depends upon the extent of profits or earnings a business has generated and can be paid either from current year or past year's profits. Dividends can increase with increase in retained earnings and vice versa
(ii) Taxation policy - Tax rates directly influences the amount of profits available for a company and accordingly declare dividends. Higher tax rates can reduce profits and reduce the chances of declaring dividends and vice versa
(iii) Access to capital markets - Businesses with easy access to capital markets can declare a higher dividend rate as it has an easy access to raising capital through capital markets.