An investor is more likely to prefer a high dividend payout if a firm:

Question

Quizplus · Accepted Answer

An investor is more likely to prefer a high dividend payout if the firm has few, if any, positive net present value projects, as it indicates that the firm does not have profitable opportunities to reinvest the earnings and hence, returning a portion of earnings as dividends would be the best option for the investors. High flotation costs, lower tax rates than the investor, a stock price that is increasing rapidly, and offering high capital gains which are taxed at a favorable rate do not necessarily make a firm attractive for a high dividend payout.

An Investor Is More Likely to Prefer a High Dividend