Some investors prefer dividends to retained earnings (and the capital gains retained earnings bring), while others prefer retained earnings to dividends. Other things held constant, it makes sense for a company to establish its dividend policy and stick to it, and then it will attract a clientele of investors who like that policy. True False

Question

Business

Alfred Haynes

15 March, 01:34

Some investors prefer dividends to retained earnings (and the capital gains retained earnings bring), while others prefer retained earnings to dividends. Other things held constant, it makes sense for a company to establish its dividend policy and stick to it, and then it will attract a clientele of investors who like that policy. True False

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Answers (1)

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Kayleigh Harvey · Answer 1

True

Explanation:

Dividends are the returns that Investors receive from the interest (Shares) they hold in a Company.

Retained Earnings are profits ploughed back into the company.

Potential Shareholders are constantly seeking to invest in companies that meet their return needs, thus companies should clearly present their pay out policies to attract the right investor