Super-normal growth refers to a firm that increases its dividend by: a. three or more percent per...

Question:

Super-normal growth refers to a firm that increases its dividend by:

a. three or more percent per year.

b. a rate which is most likely not sustainable over an extended period of time.

c. a constant rate of 2 or more percent per year.

d. $0.10 or more per year.

e. an amount in excess of $0.50 a year.

Dividends:

Dividends are the payment that shareholders receive as a consequence of the distribution of earnings that a company generates. The dividends can be provided in different ways such as cash or shares.

Answer and Explanation:

The correct answer is b. a rate which is most likely not sustainable over an extended period of time.

Super-normal growth is the situation in which the dividends are increasing at a very high rate that is referred as "supernormal". However, this high growth is expected to be unsustainable.


Learn more about this topic:

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The Dividend Growth Model

from Finance 101: Principles of Finance

Chapter 14 / Lesson 3
10K

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