Which of the following tend to keep dividends low?
I.shareholders desiring current income
II.terms contained in bond indenture agreements
III.the desire to maintain constant dividends over time
IV.flotation costs
A)II and III only
B)I and IV only
C)II, III, and IV only
D)I, II, and III only
E)I, II, III, and IV

Question

Quizplus · Accepted Answer

Bond indenture agreements often contain restrictive covenants that limit the ability of the company to pay dividends, and the desire to maintain constant dividends over time may prevent management from increasing dividends even if profits increase. Flotation costs associated with issuing new shares can also lead to keeping dividends low. Shareholders desiring current income would typically prefer higher dividends, but this does not necessarily result in low dividends. Thus, only II, III, and IV tend to keep dividends low.

Which of the Following Tend to Keep Dividends Low