If a stock's dividend increases, what will happen to the stock's price? Will increase, Decrease, or...

If a stock's dividend increases, what will happen to the stock's price?

Will increase, Decrease, or will not change.

Solutions

Expert Solution

It will be dependent upon the type of the dividend-

A. If it is a cash dividend then, the dividend is to be paid out from the share price of the company and in that case the share price of the company will decrease in order to adjust with the amount of the dividend which is to be paid to the shareholders. Hence, when the cash dividend of the stock will be increasing it will be that the price of the the company will decrease to adjust with the the effect of increase in dividend.

B. However if it is a stock dividend, the share price will be generally increasing.

But,we will have to also look it from the another perspective of reaction of the market participants because when the dividend of the stock will be declared, it will mean that the price of share will generally increase as the market participants will be satisfied about the decision of the company to distribute dividend because distribution of dividend reflect that company is trying to fulfill the need of the shareholders, so it can be having various different reaction in different situation.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

1.should these monopolists increase or decrease output, increase or decrease price, and on what information is...

1.should these monopolists increase or decrease output, increase or decrease price, and on what information is your answer based? Can the monopolists maximize profits minimize a loss ,or should they shutdown? Give a reasons for your answers based on the numbers in the rows Price MR Q TR TC P/L TVC ATC AVC MC 10 5 10 100 50 +50 30 5 3 7 50 <50 50 2500 2600 -100 1600 52 32 50 10 5 1000 10000 8000 +2000...

The contribution margin per unit increases due to: A. increase in selling price B. decrease in...

The contribution margin per unit increases due to: A. increase in selling price B. decrease in selling price C. increase in variable costs D. decrease in fixed costs

An increase in demand can be expected to ["increase", "decrease"] equilibrium price and ["decrease", "increase"] ...

An increase in demand can be expected to ["increase", "decrease"] equilibrium price and ["decrease", "increase"] equilibrium quantity. An increase in supply can be expected to ["decrease", "increase"] equilibrium price and ["decrease", "increase"] equilibrium quantity. If there is an increase in demand and an increase in supply then we can expect equilibrium price to ["increase", "stay the same", "it is not possible to say", "decrease"] and equilibrium quantity to ["decrease", "stay the same", "increase", "it is not...

Show the effect on price (increase, decrease, no effect): Show the effect on price (increase, decrease,...

Show the effect on price (increase, decrease, no effect): Show the effect on price (increase, decrease, no effect) for each of the following situations under three form of market efficiency Situations Situations Weak Semi-Strong Strong The WSJ publishes that Landmark Inc. declared a dividend of $1 per share Landmark Inc. board members decide in a closed door meeting to open a new factory in Taiwan Your broker in NYSE tells you that Landmark Inc. CEO is going to declare retirement

A stock's price today is $20.75, and it is expected to pay out a dividend of...

A stock's price today is $20.75, and it is expected to pay out a dividend of $0.50 per share in one year. What is the stock's expected dividend yield? (Enter your answer as a decimal rounded to 4 decimal places, not a percentage). For example, enter .0153 instead of 1.53%.

Suppose there is a decrease in the price of butter. What do we expect to happen...

Suppose there is a decrease in the price of butter. What do we expect to happen to the demand for bread? Assume that bread and butter are often consumed together. Select the correct answer below: There will be a decrease in demand for bread. There will be an increase in demand for bread. There will be no change in the demand for bread and no movement along the demand curve. There will be no change in the demand for bread,...

Assume there is a temporary increase in oil prices. a) What will happen to the price...

Assume there is a temporary increase in oil prices. a) What will happen to the price level, unemployment, and output when the oil prices increased in the short-run? Show it on a graph. b) Now suppose the government does not intervene? How will the economy adjust in the long-run? Explain. c) Now suppose the government decided to intervene. What can be done? Give one example of fiscal policy and one example of monetary policy with the reasoning behind them? How...

a. Suppose the price of gasoline increases. What will happen to quantity demanded? What do you...

a. Suppose the price of gasoline increases. What will happen to quantity demanded? What do you think best explains the change in quantity demanded? b. Suppose the price of a brand of face cleanser increases. What will happen to quantity demanded? Which of the two reasons, income or substitution, do you think best explains the change in quantity demanded?

Question: Equilibrium price must decrease if: a. demand increases and supply increases b. demand increases and...

Question: Equilibrium price must decrease if: a. demand increases and supply increases b. demand increases and supply decreases c. demand decreases and supply decreases d. demand decreases and supply increases

If the central bank increases money supply, what will happen to product/service price in general and...

If the central bank increases money supply, what will happen to product/service price in general and interests in general? The mechanism of how the change in money supply influences prices and interest rates should be clearly explained.

Subjects