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In general, firms dividend practices fit into the categories listed in the following table (constant payout ratio, low-regular-dividend-plus-extras, residual dividend policy, and stable, predictable dividend
In general, firms dividend practices fit into the categories listed in the following table (constant payout ratio, low-regular-dividend-plus-extras, residual dividend policy, and stable, predictable dividend policies). Identify the category that each practice corresponds to in the table.
Practice | Constant Payout Ratio | Low-Regular-Dividend- Plus-Extras | Residual dividend | Stable, Predictable Dividend | |
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Globo-Chem Co. uses a policy that allows it to pay a small, consistent dividend in years when earnings are low or large capital investments are required. In some years, the firm pays an extra dividend when excess funds are available. |
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St. Mildreds Brewing Co.s dividends represent the portion of earnings left after it has made all profitable investments. |
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Spentworth Industries Inc.s annual dividends increase by the same amount, or percentage, every year. |
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Omni Consumer Products Co. has received a lot of negative feedback from its investors because it uses a dividend policy that pays a set percentage of its net income even though the company's earnings fluctuate dramatically. The investors feel that this dividend policy creates too much uncertainty about the expected dividend each year. |
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