Which of the Following Statements Is Correct

question 52

Multiple Choice

Which of the following statements is correct?

• A)One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive.
• B)If a company has an established clientele of investors who prefer a high dividend payout, and if management wants to keep stockholders happy, it should not follow the strict residual dividend policy.
• C)If a firm follows a strict residual dividend policy, then, holding all else constant, its dividend payout ratio will tend to rise whenever the firm's investment opportunities improve.
• D)Despite its drawbacks, following the residual dividend policy will tend to stabilize actual cash dividends, and this will make it easier for firms to attract a clientele that prefers high dividends, such as retirees.