Phoenix plc had suffered operating losses between 2018 and 2019, during which time the company had to stop paying dividends. A new management team was appointed who led a restructuring programme and introduced some new investment initiatives. As a result of this the company returned to profitability in 2021. The year ending 31st March 2022 saw another profitable year as fortunately it was in a sector not negatively impacted by the pandemic, in fact the profits were an increase on the 2021 results. The board of directors have met to discuss the results for the year ended 31st March 2022, they have differing views as to how to maintain profitability and how, or whether, dividend policy has an impact:

The Marketing Director, was of the opinion that the companys results and standing in the marketplace are the significant factor and that dividends are unimportant. The Chief Executive is focused on the need to be able to undertake investment opportunities which will maintain and improve profit, particularly given the companys history whereby new investment initiatives helped turn the company around into a profitable enterprise. She considers retaining funds for investment the priority and it is only after the financing of such projects has been undertaken should the surplus be paid out to shareholders. The Finance Director is of the opinion that dividend can impact the share price of the company and therefore a stable dividend policy should be introduced as soon as possible.

Required: Critically discuss the arguments of each of the 3 directors using the theory of dividend policy. What would your recommendation be to the board of directors as to the appropriate dividend policy to pursue? State any other information you might require in order to refine your answer.