A firm that maintains a "stable dollar dividend per share" will generally not increase the dividend unless
A) a stock split occurs.
B) the firm merges with another profitable firm.
C) the firm is sure that a higher dividend level can be maintained.
D) the P/E ratio has increased steadily over the past 5 years.

Question

Quizplus · Accepted Answer

A firm that maintains a "stable dollar dividend per share" is committed to maintaining a consistent dividend payment to its shareholders. Therefore, the firm is unlikely to increase its dividend unless it is sure that the higher dividend level can be maintained. Option A, B, and D are unlikely to trigger a dividend increase under such a policy.

A Firm That Maintains a "Stable Dollar Dividend Per Share