5. Dividend practices In general, firms' dividend practices fit into the categories listed in the...
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5. 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. Constant Payout Ratio Low- Regular- Dividend- Plus- Extras Residual Dividend Stable, Predictable Dividend Practice Specialized Chemicals Inc.'s investors like the firm's dividend policy because the firm pays the same dividend every year no matter how the firm performs. The goal of Tobotics Inc.'s dividend policy is to reinvest earnings into the firm if the rate of return that the firm can earn on reinvested earnings exceeds the rate that investors, on average, can earn on other investments of comparable risk. If there are any funds remaining after this reinvestment, they are paid out in the form of dividends. Praxis Corp. always pays the same percentage of its annual net income as dividends. Business Logistics Corp. has volatile earnings and cash flows, so it pays a small dividend every year and then pays additional dividends in good years
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