When a firm begins to pay dividends,it is signaling that it always expects to have enough cash flow to maintain and increase its dividend payout.

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When a firm pays dividends, it is indicating that it has enough cash flow to support and potentially increase its dividend payments in the future. This is because dividends are typically seen as a long-term commitment by the company to its shareholders, and a reduction in dividend payments can signal financial distress or uncertainty about future cash flow. Therefore, firms that pay dividends are generally expected to have sufficient cash flow to maintain their dividend payments over time.

When a Firm Begins to Pay Dividends,it Is Signaling That