Question

In the real world, we find that dividends Group of answer choices Tend to be a lower percentage of earnings for mature firms. Are usually changed every year to reflect earnings changes. Usually exhibit greater stability than earnings. Are usually set as a fixed percentage of earnings. Fluctuate more widely than earnings.

Answer 1

Answer: Usually exhibit greater stability than earnings.

Explanation:

A dividend is a distribution of profits to the shareholders by a corporation. When a profit is earned by a corporation, the corporation pays a proportion of its profit as dividend to the shareholders.

Although dividends should be distributed in relation to the earnings for the year, that is, when earnings fall, the dividends should fall and vice versa. In real world, dividends are usually stable because a regular dividend paying company is seeen to be a better firm and also investor friendly. Therefore, even if the earnings fall, the dividend yield usually remain stable.

So, correct option is option 1) usually exhibit greater stability than earnings