Which of the following is not a logical justification for dividend preference (vs.capital gains)in the real world?
A) Institutional restrictions involving dividends
B) Higher share prices from higher payouts
C) A steady source of cash without transaction costs
D) Differing income tax rates

Question

Quizplus · Accepted Answer

While higher payouts may lead to higher share prices in the short term, this is not a logical justification for a preference for dividends over capital gains in the long term. The ultimate goal of investing is to maximize returns, whether through dividends or capital gains, and this should drive investment decisions. The other options listed - institutional restrictions, a steady source of cash, and differing tax rates - can all play a role in determining whether investors prefer dividends or capital gains.

Which of the Following Is Not a Logical Justification for Dividend