The fact that flotation costs can be significant is justification for

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Flotation costs refer to the expenses incurred by a company when it issues new securities. These costs include fees paid to investment bankers, legal and accounting fees, and printing costs. Flotation costs can be significant, especially for smaller companies or those with riskier projects. Therefore, maintaining a low dividend policy and issuing extra dividends rarely can help companies reduce these costs by minimizing the need to issue new shares frequently. This can also help maintain financial stability and avoid diluting the shares of existing shareholders. Maintaining a high dividend policy, on the other hand, may increase the need for frequent share issuances, especially if the company's profits decline. Therefore, it may not be the best choice to justify flotation costs. Maintaining a constant dividend policy or issuing larger dividends may also not be effective for reducing flotation costs.

The Fact That Flotation Costs Can Be Significant Is Justification