The subject of this paper is the theory of dividend policy and dividend policy of companies in the Republic of Croatia. Dividend policy theories seek to answer the question of how the dividends effect the value of a stock/company. The literature highlights theories about different dividend policies: traditionalist, modernist, and tax preference theory. In addition, some concepts have been developed that should make it easier for managers to define dividend policy. The dividend policy determines how much earnings will be paid to shareholders, ie what the payout indicator will be, the type of dividends, and whether dividend stability will be maintained. Companies shown that they don't change dividends and dividend policy often. When it comes to earnings growth / rising rates, they do not expect the overall growth rate to be of a lasting nature. Changes are thought to be more important than the level of dividends, and that dividend reductions are particularly undesirable. This is why managers prefer a longterm dividend payout target. Nowadays stable dividends mean not equal amounts of dividends, but dividends that grow at a reasonable and predictable rate. If it is accepted that investors prefer dividend stability, it follows that for such a company there will be a minimum cost of equity and a maximum share price.