The advantage of using the low-regular-and-extra dividend policy is that
A) the firm avoids giving the shareholders false hopes.
B) if the firm's earnings drop, so does the dividend payment.
C) the extra dividend may become a regular event.
D) cyclical shifts in earnings may be avoided.

Question

Quizplus · Accepted Answer

The low-regular-and-extra dividend policy avoids giving shareholders false hopes by maintaining a stable base dividend and only providing extra dividends when earnings are sufficient, thus not committing to unsustainable payouts.

The Advantage of Using the Low-Regular-And-Extra Dividend Policy Is That