The information content of a dividend increase generally signals that:

Question

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A dividend increase signals that the management of the firm believes that the future earnings and cash flows of the company will be strong enough to maintain or increase the dividend in the future. It indicates that the firm has confidence in its long-term growth prospects and that it has excess funds available to distribute to shareholders. Dividend increases are generally seen as positive signals by investors because they signify that the firm has a healthy financial position and a positive outlook for the future.

The Information Content of a Dividend Increase Generally Signals That