A major desire of stockholders regarding dividend policy is:
a. frequent stock dividends.
b. high payouts when earnings are up, and lower payouts when earnings are down.
c. dividend stability.
d. the payment of dividends at frequent intervals.
A dividend is the share of the companys earnings that are distributed to the shareholders according to the number of shares one holds. Dividends are distributed annually. However, some large corporates allocate every quarter. Dividends are paid after all the creditors are paid. When a company faces financial crisis, it may skip or postpone paying dividends to the shareholders.
Answer and Explanation:
The answer is C). Dividend stability.
Divided stability is a desirable policy to both the management of a company and the shareholders. It means regularity of dividend payments annually. All other factors being constant, stable dividends may lead to an increase in the market price of shares. Divided stability conveys to shareholders and potential investors that the company has a bright future.
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from Finance 101: Principles of FinanceChapter 16 / Lesson 1