The information content of a dividend increase generally signals that:

A) the payer has a one-time surplus of cash.

B) the payer has few, if any, net present value projects to pursue.

C) management believes earnings growth will be strong going forward.

D) the payer has more cash than it needs due to a decline in future orders.

E) dividends thereafter will be lower.

Question

Aditya Reese

Business

5 July, 15:45

The information content of a dividend increase generally signals that:

A) the payer has a one-time surplus of cash.

B) the payer has few, if any, net present value projects to pursue.

C) management believes earnings growth will be strong going forward.

D) the payer has more cash than it needs due to a decline in future orders.

E) dividends thereafter will be lower.

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Answers (1)

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Ashlynn Hammond · Answer 1

C) management believes earnings growth will be strong going forward.

Explanation:

Dividend is the percentage of income that the corporation aims to allocate to the company's shareholders. When there is an rise in dividend it means that the company will have good results for the future. The rise in the dividend is a prediction of future profitability for the firm.

Plus it would be distributed to the preferred shareholders and the equity shareholders and the preference is given first to preferred shareholders