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2. Other dividend policy issues The term clientele effect refers to the tendency of firms to attract investors who like their dividend policies. Three
2. Other dividend policy issues The term clientele effect refers to the tendency of firms to attract investors who like their dividend policies. Three potential investors are described in the table. Indicate which type of firms they are most likely to be attracted to. Potential Investors Stockholders in their peak earning years Types of Firms Investors who have a preference for current investment income Retired individuals, pension funds, and university endowment funds 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? Stay Swift Corp. most likely pays very large dividends in years with high earnings and small dividends in the years with low earnings. 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.
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