Which of the following statements concerning dividend policy is true? A constant
ID: 2732921 • Letter: W
Question
Which of the following statements concerning dividend policy is true?
A constant payout ratio policy enables stockholders to accurately predict future dividends.
Since there is no evidence that one investor group is better than another, firms should change dividend policies frequently with no adverse impact stock price.
Unexpected dividend increase announcements are usually perceived as positive signals because they indicate an expected increase in future earnings of the firm.
Firms with stable earnings, such as utilities, tend to have a low dividend payout ratio.
1.A constant payout ratio policy enables stockholders to accurately predict future dividends.
2.Since there is no evidence that one investor group is better than another, firms should change dividend policies frequently with no adverse impact stock price.
3.Unexpected dividend increase announcements are usually perceived as positive signals because they indicate an expected increase in future earnings of the firm.
4.Firms with stable earnings, such as utilities, tend to have a low dividend payout ratio.
Explanation / Answer
Answer:
Option A is correct.
Constant dividend policy enables a company to pay constant amount of dividend regularly and allows in that aggregate deal an element of flexibility in supplementing the income of shareholders only when the company's earnings are higher than the usual, without committing itself to make such larger payments as a regular part of the future dividend.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.