Answered: Why might other investors prefer…

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Why might other investors prefer low-dividend-paying stocks?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 6QTD

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Question

Why might other investors prefer low-dividend-paying stocks?

Expert Solution

Step 1

Investors determine the dividend as part of the stock value of a stock when stock offers a dividend.

Step 2

This is the return on the dividend. For instance, a dividend of 1 percent is a share stock that pays a yearly 25 cents dividend at a stock price of $ 25. While all investors want the greatest potential dividends, many are influenced by cheap dividend businesses.

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