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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 dividendSir correct answer is 2,3 and 4. But please can you explain why 1 cannot be the correct answer?
The 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.
Because 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 20×3 to 20×4 it has increased by 8.33%, from 20×4 to 20×5 it has increased by 7.69% and from 20×5 to 20×6 it has increased by 7.14%.
And the overall trend shows gradual decrease in dividend growth?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%.
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