You notice that a company has consistently paid a dividend of $.20 per quarter except for the quarter one year ago when it paid $.52 when it had an unusually high level of earnings that the company did not believe was going to be sustainable into the future.Such a pattern is most indicative of what kind of dividend policy?

Question

Quizplus · Accepted Answer

The fact that the company pays a consistent dividend of $.20 per quarter, except for one quarter when it paid a much higher dividend of $.52, suggests that the company is following a low-regular-and-extra dividend policy. This policy involves the company paying a lower, regular dividend on a consistent basis, with the possibility of paying a higher "extra" dividend when earnings are exceptionally high. This is exactly what happened in the quarter one year ago when earnings were unusually high and the company paid a higher dividend.

You Notice That a Company Has Consistently Paid a Dividend