The paper outlines to address that why most companies pays significant dividends, given the costs of paying them. In the light of policies actually adopted by the organizations to administer payout decisions and their resultant implications, the study attempts to seek the gap between the various theories and ground realities. The theories of dividend decisions deliberate various outcomes of a dividend policy followed by a firm. The paper intends to analyze the payout policy and behavior of managers taking such decisions, and find out whether they are conservative, if so, to what extent in changing dividend policy, and to bring out probable reasons or explanations for it. Further, the study proposes to find out whether Lintner partial adjustment model holds true for NSE NIFTY constituent companies for 2007-2012, and to ascertain the speed of adjustment and target payout ratio of NSE NIFTY constituent companies which will provide benchmark for comparisons. In addition to this, the paper seeks to evaluate the effect of dividend reduction on share price of NSE NIFTY firms for 2009, 2010, 2011 and 2012 and hence on shareholder wealth.