Which of the following statements is correctabout dividend policies?

A. According to the current tax code, dividend payments are taxed at a lower rate than long-termcapital gains on stock.

B. Dividend reinvestment plans (DRIPs) allow shareholders to avoid paying taxes on the dividends that they choose to reinvest.

C. Residual dividend policy enables a company to follow a stable dividend policy.

D. The clientele effect suggests that companies should follow a stable dividend policy.

E. Modigliani and Miller argue that investors prefer dividends to capital gains because dividends are more certain than capital gains.