Which of the following would be the best investment?
A)A company that pays no dividends,but has substantial net income.
B)A company that pays substantial dividends,but whose earnings per share has been declining over the past several years.
C)A company whose stock price has increased steadily,but pays no dividends.
D)It depends on one's investment objectives.

Question

Quizplus · Accepted Answer

Investors acquire common stock because they expect a return on their investment.This return can come in two forms: dividends and increases in stock price.Some investors prefer to buy stocks that pay little or no dividends (called a growth investment)because companies that reinvest the majority of their earnings tend to increase their future earnings potential,along with their stock price.Rather than wait for growth in stock value,other investors,such as retired people who need a steady income,prefer to receive their return in the form of dividends.These people often seek stocks that consistently pay dividends (called an income investment).

Which of the Following Would Be the Best Investment