Which of the following dividend policies would cause dividends per share to fluctuate the most?
A) Residual dividend policy
B) Stable dollar dividend
C) Small, low, regular dividend plus a year-end extra
D) Small, low, regular dividend

Question

Quizplus · Accepted Answer

A residual dividend policy leads to dividends that fluctuate the most because the amount paid out in dividends is based on the leftover or "residual" earnings after all operational and project financing needs are met. This means that dividends will directly vary with the company's profitability and investment opportunities, causing more fluctuation compared to other policies that aim for stability or regularity in dividend payments.

Which of the Following Dividend Policies Would Cause Dividends Per