An increase in dividends might not increase price and may actually decrease stock price if:

Question

Quizplus · Accepted Answer

If the dividend increase cannot be sustained, investors may interpret it as a negative signal about the company's future prospects, leading to a decrease in stock price. This is because dividends are seen as a way for companies to share their profits with shareholders, and if the company is unable to sustain the increased dividend payments, it may indicate that its profitability is not as strong as previously thought. Therefore, an increase in dividends that cannot be sustained may actually decrease stock price. The other options presented (B, C, and D) do not necessarily imply that an increase in dividends would have a negative impact on stock price.

An Increase in Dividends Might Not Increase Price and May