Beta Corporation is a manufacturer of inflatable furniture. Which of the following scenarios best reflects a stable dividend policy for Beta?
A. Maintaining a constant dividend payout ratio of 40–50%.
B. Maintaining the dividend at $1.00 a share for several years given no change in Beta’s long-term prospects.
C. Increasing the dividend 5% a year over several years to reflect the two years in which Beta recognized mark-to-market gains on derivative positions.
Ans: B. Maintaining the dividend at $1.00 a share for several years given no change in Beta’s long-term prospects.
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