The problem with a constant-payout-ratio dividend policy from the shareholder's perspective is that
A) it bores the shareholders.
B) if the firm's earnings drop, so does the dividend payment.
C) even when earnings are low, the company must pay a fixed dividend.
D) there is no informational content.

Question

Quizplus · Accepted Answer

A constant-payout-ratio dividend policy means dividends are a fixed percentage of earnings. If earnings drop, dividends will also decrease, which may be undesirable for shareholders relying on dividend income.

The Problem with a Constant-Payout-Ratio Dividend Policy from the Shareholder's