Firms using the constant payout ratio dividend policy offer to reinvest dividends in the stocks of the dividend-paying firm.

Question

Quizplus · Accepted Answer

The constant payout ratio dividend policy means that the firm will distribute a fixed percentage of its earnings as dividends, while retaining the rest for reinvestment or other purposes. There is no offer to reinvest dividends in the stocks of the dividend-paying firm, as the dividends are paid out to shareholders.

Firms Using the Constant Payout Ratio Dividend Policy Offer to Reinvest