In response to a temporary decline in earnings per share, most companies would
A) decrease their cash dividend.
B) not decrease their cash dividend.
C) suspend their cash dividend.
D) substitute a stock dividend for the cash dividend.

Question

Quizplus · Accepted Answer

Companies typically try to maintain their cash dividend even during temporary declines in earnings per share in order to maintain investor confidence and avoid negative reactions in the stock market. Decreasing or suspending the cash dividend may cause concern among investors and potentially lead to a decline in the stock price. Substituting a stock dividend for the cash dividend is also not a common response to a temporary decline in earnings per share.

In Response to a Temporary Decline in Earnings Per Share