The advantage of using the extra dividend policy is that ________.
A) a firm can avoid giving false hopes to shareholders
B) if a firm's earnings drop, so does the dividend payment
C) the extra dividend may become a regular event
D) cyclical shifts in earnings may be avoided

Question

Quizplus · Accepted Answer

The extra dividend policy allows a firm to pay an additional dividend when earnings are strong, without committing to it as a regular payment, thus avoiding giving shareholders false hopes of consistent extra dividends.

The Advantage of Using the Extra Dividend Policy Is That