IntroductionDividends are the distribution of profits in a company. It depends on the type of dividend policy implemented by companies. The dividend policy will influence investors' behaviors and attitudes towards the company. Many economists and financial experts have built different theories to interpret the effects of a dividend policy on society. But these theories are questionable since they are not tested in the real world. Managers' decisions about determining the size and date of a company's next dividend payment are also important to both companies and shareholders. They will influence the company to pay out an adequate amount of dividends at the right time. This essay will discuss whether theories of dividend payouts, such as dividend irrelevance and signaling effects, are applicable in the real world. It will then outline some key factors that managers should consider when deciding the timing and size of a company's next dividend payment. Finally, we will conclude with the importance of a company's decision on paying dividends. Discussion on Availability of Theories in the Real World Many theories such as dividend irrelevance, tax and customer effects, information content, and signaling effects are controversial in financial studies. Economists often debate whether they are applicable and reliable in reality. Miller and Modigliani's (1961) theory of dividend irrelevance would be typical. MM suggested that shareholders are indifferent to dividend policy changes in the company. A company's dividend policy will not affect the current value of its shares and shareholder wealth. The value of a company depends on the profitability of its activities and its investment projects, but not on how it is "packaged for distribution... middle of paper... of corporate income including dividends, retained earnings and Taxes. The American Journal Review, 46(2), pp. 97-113. Mackenzie, M., 2012. US investors worry about dividend tax. Financial Times, [online] 12 November 2012. Available at: [Accessed 15/5/2014].Miller, M.H. and Modigliani, F., 1961., Dividend Policy, Growth, and the Valuation of Shares, 34(4), pp. K., Nuseibeh, R. and Rashed, W., 2013. Managers' perceptions of dividend policy: Evidence from companies listed on the Abu Dhabi Stock Exchange. Issues in Business Management and Economics, 1(1), pp. 012. Ross, S.A., Westerfield, R.W., Jaffe, J. and Jordan, B.D., 2008. Modern Financial Management: International Student Edition. New York: McGraw-Hill Company.