If a firm has a 50% payout ratio, paying a $1 dividend will cause the share price to decline 50 cents on the ex-dividend date.

Name: If a firm has a 50% payout ratio, paying a $1 dividend will cause the share price to decline 50 cents on the ex-dividend date.
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Question

Quizplus · Accepted Answer

The payout ratio does not directly determine how much a stock's price will drop on the ex-dividend date. The price drop is typically equal to the dividend amount, as the value of the dividend is no longer included in the stock's price.

If a Firm Has a 50% Payout Ratio, Paying a $1