The president of Smith Brothers,Inc.wants a dividend policy that minimizes the likelihood of decreasing the company's dividend per share.Which of the following policies should the CEO select?

Question

Quizplus · Accepted Answer

A stable dollar dividend per share ensures that the dividend remains constant and does not decrease, regardless of changes in earnings. The constant dividend payout ratio and regular dividend plus a year-end extra policies are both dependent on earnings and can result in a decrease in dividends if earnings decline. The statement "All policies have the same likelihood of a dividend decrease because dividend changes are dependent on changes in earnings" is not accurate, as some policies, such as a stable dollar dividend, can help minimize the likelihood of a decrease in dividends.

The President of Smith Brothers,Inc