Which of the following tend to keep dividends low? I.state laws restricting dividends in excess of retained earnings.
II)terms contained in bond indenture agreements.
III)the desire to maintain constant dividends over time.
IV)ﬂotation costs.

Question

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I. State laws often restrict dividends to amounts not exceeding retained earnings to ensure the company maintains a healthy level of capital, thus potentially keeping dividends low. II. Bond indenture agreements may include restrictions on dividend payments to protect bondholders, ensuring the company maintains a certain level of financial stability. III. Companies may aim to maintain constant dividends over time, which can lead to lower dividends during profitable years to ensure they can sustain the same level of dividends during less profitable years. IV. Flotation costs, which are the costs associated with issuing new securities, can lead to companies retaining more earnings to finance new projects instead of paying out high dividends, as issuing new securities to raise capital can be expensive.

Which of the Following Tend to Keep Dividends Low? I