A firm that maintains stable cash dividends will generally not increase the dividend unless
A)a share split occurs.
B)the firm merges with another profitable firm.
C)the firm is sure that a higher dividend level can be maintained.
D)the price−earnings (P/E)ratio increased steadily over the past five years.

Question

Quizplus · Accepted Answer

A firm that maintains stable cash dividends is typically focused on maintaining a consistent payout to its shareholders. Therefore, it is unlikely to increase the dividend unless the firm is sure that it can maintain the higher dividend level. A share split or merger with another firm may impact the dividend amount, but these events are not the primary drivers of dividend increases. Similarly, the P/E ratio may be a factor in a firm's decision-making, but it is not a guarantee that a dividend will be increased.

A Firm That Maintains Stable Cash Dividends Will Generally Not