The CEO of Marletti Pasta Company wants a dividend policy that minimizes the likelihood of decreasing the company's dividend per share.Which of the following policies should the CEO select?

Question

Quizplus · Accepted Answer

A stable dollar dividend per share policy ensures a fixed amount of dividend is paid out per share, regardless of changes in earnings. This policy minimizes the likelihood of a dividend decrease as it provides a level of stability to shareholders. The constant dividend payout ratio policy (A) and regular dividend plus a year-end extra policy (C) both depend on changes in earnings and may lead to fluctuations in the dividend per share. Option D is incorrect as some dividend policies are more likely to result in a dividend decrease than others, depending on their structure.

The CEO of Marletti Pasta Company Wants a Dividend Policy