Which of the following is true of a dividend payout?
A) When a firm announces that it will increase its dividend, the share price usually decreases on that news.
B) Dividend payments send a positive signal to investors in the marketplace that management believes that the stock is overvalued.
C) When a firm pays out dividends the share price will fall.
D) Dividend payouts have no impact on the share price of a stock in an efficient market.

Question

Quizplus · Accepted Answer

When a firm pays out dividends the share price will fall, as the company is distributing a portion of its profits to shareholders, which reduces the amount of cash available for future investments or growth opportunities. This decrease in cash can lead to a decrease in share price.

Which of the Following Is True of a Dividend Payout