While common stockholders can potentially receive unlimited dividend payments if the firm is highly profitable, they have
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While common stockholders can potentially receive unlimited dividend payments if the firm is highly profitable, they have no special or guaranteed dividend rights. The payment and size of dividends are determined by the board of directors of the issuing firm.
Unlike interest payments on debt, a corporation does not default if it misses a dividend payment to common stockholders. Thus, common stockholders have no legal recourse if dividends are not received, even if a company is highly profitable and chooses to use these profits to reinvest in new projects and firm growth. What is another drawback with common stock dividends from an investor's viewpoint?
Related Book For
Fundamentals of Investments, Valuation and Management
ISBN: 978-1259720697
8th edition
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin
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