If a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that

• no dividends to common stockholders.
• dividends only out of funds raised by the sale of new common stock.
• dividends only out of funds raised by borrowing money (i.e., issue debt).
• dividends only out of funds raised by selling off fixed assets.
• no dividends except out of past retained earnings.