CS Executive · Corporate Accounting and Financial Management · Dividend Decisions
A company that pays a fixed Re 2 per share every year regardless of fluctuations in earnings is following which dividend policy?
This is a stable dividend policy with constant dividend per share. The company pays the same rupee amount every year irrespective of earnings changes, unlike a constant payout ratio, where dividends move with profits, or a residual policy.
- AStable dividend policy with constant dividend per shareCorrect
- BConstant payout ratio policy
- CResidual dividend policy
- DNo-dividend policy
Explanation
A fixed rupee amount per share each year is a stable (constant DPS) policy. A constant payout ratio would make dividends vary with earnings, and a residual policy pays only what is left after funding profitable investments.
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