Constant DPS plus Extra or Surplus
1. Beneath this policy a constant DPS is paid every year. Nonetheless extra dividends are paid in years of supernormal earnings.
2. It provides the firm flexibility to raise dividends when earnings are high and the shareholders are agreed to give a chance to participate in super normal earnings
3. The extra dividends are specified in such a way that it is not perceived as commitments via the firm to continue the extra dividend in the future. It is applied by the firms whose earnings are highly volatile as agricultural sector.