Question

Which of the following is true of a dividend​ payout? A. When a stock begins to trade ex dividend the share price will fall. B. When a firm announces that it will increase its​ dividend, the share price usually decreases on that news. C. When a stock begins to trade ex dividend there is no impact on the share price if the market. is efficient D. Dividend payments send a positive signal to investors in the marketplace that management believes that the stock is overvalued.

Answer 1

Answer: Option A

Explanation:

Dividends affect the stock price in many ways. The stock price is marked down by the investors as they think the dividends paid out is a source of investment. But the company which issues the dividend to the shareholders does it as a an act of gratitude for investing in their business. They share the profits with the shareholders by paying out dividends.

Companies with substantial profits issues dividends regularly. Dividends are either paid in the form of money per share or by issuing additional shares.