Which of the following statements would be consistent with the bird-in-the-hand dividend theory?
A) Investors are indifferent whether stock returns come from dividend income or capital gains income.
B) Dividends are more certain than capital gains income.
C) Wealthy investors prefer corporations to defer dividend payments because capital gains produce greater after-tax income.
D) Dividends are less certain than capital gains.

Question

Quizplus · Accepted Answer

The bird-in-the-hand dividend theory suggests that investors prefer a current and certain dividend payout over the potential for higher but uncertain capital gains in the future. Therefore, statement B, which states that dividends are more certain than capital gains income, would be consistent with this theory. A, C, and D all contradict or do not address the main premise of the bird-in-the-hand theory.

Which of the Following Statements Would Be Consistent with the Bird-In-The-Hand