Dividend is that portion of profit which is distributed to shareholders. Dividend decision involves how much profit earned by company is to be distributed to the shareholders and how much of it should be retained in the business. 

The following are the factors affecting dividend decisions: 

1. Amount of Earnings: Dividends are paid out of current and past earning Therefore, earnings is a major determinant of the decision about dividend. 

2. Stability Earnings: Other things remaining the same, a company having stable earning is in a better position to declare higher dividend. A company having unstable earnings is likely to pay smaller dividends. 

3. Stability of Dividends: Companies generally follow a policy of stabilizing dividend per share. The increase in dividends is generally made when there is confidence that their earning potential has gone up and not just the earnings of the current year. 

4. Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings so as to finance the required investment. The dividend in growth companies is, therefore, smaller than that in the non-growth companies.