It is more common for companies to choose a ________ dividend policy over a ________ dividend policy.

Question

Quizplus · Accepted Answer

Companies tend to prefer a sticky dividend policy, where they aim to maintain consistent dividend payouts, over a residual dividend policy, where dividends are paid out from leftover earnings after all projects have been funded. This preference is due to the signaling effect consistent dividends have on indicating company stability and the desire to avoid the negative market reaction that can come from reducing dividends.

It Is More Common for Companies to Choose a ________