Firms in cyclical industries may supplement regular dividends with extra dividends.

Question

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Firms in cyclical industries often experience fluctuations in their financial performance due to changes in the economy. As a result, they may choose to supplement regular dividends with extra dividends during good years when they have excess cash on hand. This helps to satisfy investors' expectations for income and can also help to boost the company's stock price. However, during lean years, the company may have to reduce or eliminate these extra dividends to conserve cash and maintain financial stability.

Firms in Cyclical Industries May Supplement Regular Dividends with Extra