A large regular dividend always denotes a firm with a low level of cash that also has many new project alternatives.

Question

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A large regular dividend does not necessarily denote a firm with a low level of cash or many new project alternatives. A company may pay a large dividend to return excess cash to shareholders, or because it is required to do so by its dividend policy or contractual obligations. Conversely, a company may choose to retain earnings for investment in new projects rather than paying a dividend. Therefore, there is no direct correlation between dividend payments and a company's level of cash or investment opportunities.

A Large Regular Dividend Always Denotes a Firm with a Low