Avoiding dividend cuts is consistent with both a residual and a compromise dividend policy.

Question

Quizplus · Accepted Answer

A residual dividend policy focuses on investing in positive NPV projects first and paying out any leftover earnings as dividends, which could lead to fluctuating dividends. A compromise dividend policy aims to balance the goals of a residual policy with the desire to provide stable dividends, but avoiding dividend cuts is not a primary concern of a residual policy.

Avoiding Dividend Cuts Is Consistent with Both a Residual and a Compromise