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Dividend Policy

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Here are several assertions about typical corporate dividend policies. Which of them are true? Write out a corrected version of any false statements.

a. Most companies set a target dividend payout ratio.
b. They set each year's dividend equal to the target payout ratio times that year's earnings.
c. Managers and investors seem more concerned with dividend changes than dividend levels.
d. Managers often increase dividends temporarily when earnings are unexpectedly high for a year or two.

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Assertions about typical corporate dividend policies are examined.

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a. Most companies set a target dividend payout ratio.

TRUE
Studies by Lintner and Fama suggest that most companies adjust their payout ratios towards ideal or ...

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