Under the residual theory of dividends, high-growth companies should be paying dividends, while profitable, mature companies would not pay dividends.

Question

Quizplus · Accepted Answer

Under the residual theory of dividends, high-growth companies typically reinvest their earnings into the business for further growth and do not pay dividends, while profitable, mature companies that have fewer investment opportunities may pay dividends to shareholders.

Under the Residual Theory of Dividends, High-Growth Companies Should Be