In general, firms dividend practices fit into the categories listed in the following table (constant payout ratio,
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In general, firms’ dividend practices fit into the categories listed in the following table (constant payout ratio, low-regular-dividend-plus-extras, residual dividend policy, and stable, predictable dividend policies). Identify the category that each practice corresponds to in the table.
Practice | Constant Payout Ratio | Low-Regular-Dividend- Plus-Extras | Residual Dividend | Stable, Predictable Dividend | |
---|---|---|---|---|---|
Atherton Fuels Inc.’s investors like the firm’s dividend policy because the firm pays the same dividend every year no matter how the firm performs. | |||||
Tobotics Inc. pays dividends only if more earnings are available than are needed to support the optimal capital budget. | |||||
Smith and Jones Co. uses a policy that allows it to pay a small, consistent dividend in years when earnings are low or large capital investments are required. In some years, the firm pays an extra dividend when excess funds are available. | |||||
Globex Corp. always pays the same percentage of its annual net income as dividends. |
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
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