Descriptions Terms If a shareholder opts to participate in this program, their dividends are automatically used to purchase additional shares of the firm's outstanding or newly issued stock. If a firm's net income varies from year to year, this dividend policy exposes a shareholder to uncertainty regarding the amount of dividends to be received each year. This theory contends that a firm's dividend policy will not impact either the value of the firm or its cost of capital. According to this policy, the amount of the firm's dividends paid is based on the earnings left over after the funding of the firm's optimal capital budget. This dividend policy maximizes the value of a firm. \begin{tabular}{|c|} \hline Constant payout ratio \\ \hline Dividend irrelevance theory \\ \hline Dividend reinvestment plans \\ \hline Holder-of-record date \\ \hline Information content hypothesis \\ \hline Optimal dividend policy \\ \hline Residual dividend policy \\ \hline Stock dividend \\ \hline Stock repurchase \\ \hline Stock split \\ \hline \end{tabular}