Which of the following statements is correct? One advantage of the residual dividend policy is that it leads to a stable dividend payout, which investors like. An increase in the stock price when a company decreases its dividend is consistent with signaling theory as postulated by MM. If the "clientele effect" is correct, then for a company whose carnings fluctuate, a policy of paying a constant percentage of net income will probably maximize the stock price. Stock repurchases make the most sense at times when a company believes its stock is undervalued. Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above average payout ratios.