Managers have been characterized as reluctant to increase dividends if:
A) dividends were increased in the preceding year.
B) earnings have permanently increased.
C) the dividend increase cannot be sustained.
D) the dividend payout ratio exceeds 20%.

Question

Quizplus · Accepted Answer

Managers may be reluctant to increase dividends if they believe that the increase cannot be sustained. This could be due to various factors such as a temporary increase in earnings, uncertain future earnings, or capital expenditure needs. A previous year's dividend increase (option A) or a high payout ratio (option D) may not necessarily limit dividend increases if the company's financial position and future prospects are strong. Option B is incorrect as permanent earnings increase would be a positive factor for dividend increases.

Managers Have Been Characterized as Reluctant to Increase Dividends If