If a share price increased after a dividend increase, investors probably interpreted the increase as a signal from management that the company expects sustainably higher cash flows in the future.

Question

Quizplus · Accepted Answer

This statement is true. A dividend increase is often seen as a sign that a company has confidence in its ability to generate sustained cash flows in the future, and investors may interpret this as a positive signal about the company's prospects. This can in turn drive up share prices as investors become more optimistic about the company's future performance.

If a Share Price Increased After a Dividend Increase, Investors