While Captive,Inc.has been in business for over 50 years,newly developed products pushed the firm's year-over-year growth rate to 35% during the latest three years.The firm is proud of its history of paying dividends,but the vigorous recent growth of the firm has left it cash challenged.Which of the following policies/procedures would you consider best under the circumstances?
A) Borrow long-term to pay the current dividend.
B) Look seriously for a merger partner.
C) Enter into a long-term stock repurchase program.
D) Substitute a stock dividend for the current cash dividend.

Question

Quizplus · Accepted Answer

Substituting a stock dividend for the current cash dividend allows the firm to conserve cash while still rewarding shareholders, which is beneficial given the firm's cash challenges despite its growth.