Moffatt Construction has paid a quarterly dividend of $1.25 per share for the last three years. Which one of the following is most apt to cause the company to reduce the amount of its next dividend payment?

Question

Quizplus · Accepted Answer

The loss of a major customer which lowers the overall company's outlook for the next few years is most likely to cause the company to reduce the amount of its next dividend payment. This is because the loss of a major customer would result in a decrease in revenue and net income, and may require a major cash outflow to try to replace the lost customer. In contrast, an increase in the number of new projects or a major cash outflow to start a new project may be seen as positive signs for the company's future performance, and thus may not necessarily lead to a reduction in the dividend payment.

Moffatt Construction Has Paid a Quarterly Dividend of $1