2. Other dividend policy issues

Despite the theoretical assertions of proponents of the dividend irrelevance theory, many investors do care about dividends. The table lists some factors that might affect an investors preference for dividends. Indicate whether each factor is likely to make an investor prefer to receive more or fewer dividends.

Factor	Prefer More Dividends	Prefer Fewer Dividends
Dividends are taxed in the year they are received, while capital gains are taxed when the stock is sold.
An investor is on a fixed income and depends upon returns from investment.
The value of a dividend received today is known, but the value of a capital gain received in the future is uncertain.

Stay Swift Corp. is a typical company that is very concerned with meeting investors expectations and keeping investors happy. Its earnings tend to fluctuate from year to year because of the nature of the business the company is in. Which of these statements most likely describes Stay Swift Corp.s dividend policy?

Despite the fact that Stay Swift Corp.s earnings tend to fluctuate from year to year, the company most likely pays a predictable, stable dividend each year.

Stay Swift Corp. most likely pays very large dividends in years with high earnings and small dividends in the years with low earnings.