Which of the following would usually be the most credible, positive dividend signal?

Question

Quizplus · Accepted Answer

A dividend increase when earnings are up is the most credible signal as it indicates that the company has generated sufficient profits to distribute among its shareholders. It also shows that the management is confident about the company's future earnings potential. A dividend increase when earnings are down, on the other hand, may be seen as a desperate attempt to boost the stock price or to retain shareholders. A dividend decrease in either scenario may be viewed negatively as it suggests that the company is struggling financially. A no-change in dividends when earnings are way down may also be interpreted as a lack of action or concern by the company's management.

Which of the Following Would Usually Be the Most Credible