Many firms try to maintain a stable dividend policy
A)because of the informational content of dividend changes
B)in order to satisfy investors who rely on dividends as a primary source of income
C)in order to remain as eligible investments for many financial institutions
D)all of the above

Question

Quizplus · Accepted Answer

All of the given choices are valid reasons for firms to maintain a stable dividend policy.

- A stable dividend policy can provide valuable information to investors about a firm's financial health and future prospects. If a firm changes its dividend, it could signal good or bad news for the company, potentially affecting the stock price.

- Many investors rely on dividend income as a source of regular cash flow. By maintaining a stable dividend policy, firms can satisfy these investors and help to stabilize the stock price.

- Financial institutions such as pension funds and insurance companies often have specific requirements for the types of investments they can hold. Stable dividend-paying stocks may be attractive investments for these institutions, and by maintaining a stable dividend policy, firms can remain eligible for these investments.

Many Firms Try to Maintain a Stable Dividend Policy