Which of the following statements are true about WAW dividend policy
1) Shareholders achieve steady dividend growth
2) Dividend pay out ratio is constant
3) Dividend cover is 2.5
4) Shareholders are indifferent between reinvesting in business and payment of dividend
Sir correct answer is 2,3 and 4. But please can you explain why 1 cannot be the correct answer?
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WAW co bpp kit 261
7y ago#1The current edition of the BPP Revision Kit shows the correct answer as being A (1, 2, and 3) and this is correct.
Either there was an error in the edition you are using, or you have misread the answer.
Sorry sir. I mean to ask why 1 is true?
7y ago#3Because by looking at the dividends you can see that they have been growing each year!!!!
(Steady growth does not mean the same rate each year - it means growing each year.)
But for dividend growth won't we calculate in percentage?
From 20x3 to 20x4 it has increased by 8.33%, from 20x4 to 20x5 it has increased by 7.69% and from 20x5 to 20x6 it has increased by 7.14%.
And the overall trend shows gradual decrease in dividend growth?
7y ago#5Read the second line of my previous reply!
Sir you said that rate should be growing each year.
Here it is also declining by 8.33% to 7.69% and to 7.14%.
7y ago#7No. The dividend is still growing (OK the rate of growth is lower). Choice 1 is referring to dividends growing (which they are) and does not mention the rate of growth.
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