According to the residual theory of dividends
A) dividends are to be paid out only after investment financing needs have been met.
B) earnings remaining after payment of preferred stock dividends should be paid to common stockholders.
C) dividend payments are a constant percentage of EPS.
D) a dividend is the residual above the payout ratio.

Question

Quizplus · Accepted Answer

The residual theory of dividends posits that dividends should only be paid after all investment financing needs of the company have been met, implying that dividends are what remain (the residual) after such investments.

According to the Residual Theory of Dividends