Large dividend payouts may suggest that the firm does not have sufficient investment opportunities with adequate returns.

Question

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If a firm is paying out large dividends, it means that the company is distributing a significant portion of its profits to its shareholders. This may indicate that the firm does not have sufficient investment opportunities to use its profits for reinvestment, growth or development. Therefore, a high dividend payout may suggest that the firm lacks profitable investment options.

Large Dividend Payouts May Suggest That the Firm Does Not