Session 8: Corporate Finance
Reading 31: Dividends and Share Repurchases: Analysis
LOS j: Discuss the symptoms of companies that may not be able to sustain their cash dividend.
Which of the following is most likely to be a symptom of a company that is able to sustain its cash dividend?
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A) |
Issuing new debt to fund projects and cover capital expenditures. | |
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B) |
A high dividend payout ratio compared to the industry average. | |
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C) |
A low dividend yield compared to the company's historic average. | |
High dividend yields compared to the company’s record suggest that investors are expecting dividends to be cut. Net borrowings are not sustainable, and will eventually require a cut in share repurchases and dividends. A higher-than-average dividend payout ratio creates the risk that dividends may be cut if earnings decline. | 
发表于 2011-3-10 15:13
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