How may a reduction in cash dividends be in the best interests of current shareholders?

Question

Quizplus · Accepted Answer

A reduction in cash dividends may be in the best interests of current shareholders if the firm uses the available cash to increase current investment and future profits. This could result in higher future dividend payouts and a higher stock price in the long run. However, it is important for the company to communicate their reasons for reducing dividends to avoid negative perceptions from shareholders. The other options given (A, C, and D) do not provide valid reasons for why a reduction in cash dividends would be in the best interests of current shareholders.

How May a Reduction in Cash Dividends Be in the Best