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  3. 38 2 2. other dividend policy issues the term cli

38 2 2. Other dividend policy issues The term clientele effect refers to the...

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2. Other dividend policy issues The term clientele effect refers to the tendency of firms to attract investors who like their dividend policies. Three potential investors are described in the table. Indicate which type of firms they are most likely to be attracted to. Potential Investors Types of Firms Stockholders in their peak earning years Investors who have a preference for current investment income Retired individuals, pension funds, and university endowment funds Roxxon Inc. is a typical company that is very concerned with meeting investors' expectations and keeping investors happy. Its earnings tend to fluctuate from year to year because of the nature of the business the company is in. Which of these statements most likely describes Roxxon Inc.'s dividend policy? O Roxxon Inc. most likely pays very large dividends in years with high earnings and small dividends in the years with low earnings. Despite the fact that Roxxon Inc.'s earnings tend to fluctuate from year to year, the company most likely pays a predictable, stable dividend each year

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