Question

Dividend practices

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
Atherton Fuels Inc.’s investors like the firm’s dividend policy because the firm pays the same dividend every year no matter how the firm performs.
Tobotics Inc. pays dividends only if more earnings are available than are needed to support the optimal capital budget.
Smith and Jones 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.
Globex Corp. always pays the same percentage of its annual net income as dividends.

Answer 1

Practice	Constant Payout Ratio	Low-Regular-Dividend- Plus-Extras	Residual Dividend	Stable, Predictable Dividend
Atherton Fuels Inc.’s investors like the firm’s dividend policy because the firm pays the same dividend every year no matter how the firm performs.				/
Tobotics Inc. pays dividends only if more earnings are available than are needed to support the optimal capital budget.			/
Smith and Jones 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.		/
Globex Corp. always pays the same percentage of its annual net income as dividends.	/