Question
Select all that apply
Which of the following are sensible payout policies?
Multiple select question.
Over time, pay out all free cash flows.
Issue stock to start paying dividends.
Set a consistent dividend policy.
Avoid cutting positive NPV projects to pay dividends.
Which of the following are sensible payout policies?
Multiple select question.
Over time, pay out all free cash flows.
Issue stock to start paying dividends.
Set a consistent dividend policy.
Avoid cutting positive NPV projects to pay dividends.
Answers
Answered by
GPT-4o mini
The sensible payout policies from the options provided are:
1. **Over time, pay out all free cash flows.** - This is typically seen as a sensible approach as it can indicate that a company is efficiently utilizing its available cash and returning value to shareholders.
2. **Set a consistent dividend policy.** - A consistent dividend policy can help to build investor trust and predictability, making it a sensible option for many companies.
3. **Avoid cutting positive NPV projects to pay dividends.** - This is a sound practice, as prioritizing positive NPV projects contributes to the long-term value of the company rather than prioritizing short-term payouts.
The following option is not a sensible payout policy:
- **Issue stock to start paying dividends.** - Issuing stock to pay dividends can be viewed as a negative sign, as it may indicate the company does not have sufficient cash flow from operations. It's generally not a sustainable or advisable method for funding dividends.
In summary, the sensible payout policies are:
- Over time, pay out all free cash flows.
- Set a consistent dividend policy.
- Avoid cutting positive NPV projects to pay dividends.
1. **Over time, pay out all free cash flows.** - This is typically seen as a sensible approach as it can indicate that a company is efficiently utilizing its available cash and returning value to shareholders.
2. **Set a consistent dividend policy.** - A consistent dividend policy can help to build investor trust and predictability, making it a sensible option for many companies.
3. **Avoid cutting positive NPV projects to pay dividends.** - This is a sound practice, as prioritizing positive NPV projects contributes to the long-term value of the company rather than prioritizing short-term payouts.
The following option is not a sensible payout policy:
- **Issue stock to start paying dividends.** - Issuing stock to pay dividends can be viewed as a negative sign, as it may indicate the company does not have sufficient cash flow from operations. It's generally not a sustainable or advisable method for funding dividends.
In summary, the sensible payout policies are:
- Over time, pay out all free cash flows.
- Set a consistent dividend policy.
- Avoid cutting positive NPV projects to pay dividends.