Asked by Tehilla Peyamipour on Apr 26, 2024
Verified
An example of the existence of an information content effect of dividends is when Telus's share price drops by 33% after it announces it is omitting its regular quarterly dividend payment.
Information Content Effect
The market’s reaction to a change in corporate dividend payout.
Share Price
The current market price of a single share of a company’s stock, which can fluctuate based on supply and demand.
Quarterly Dividend
A distribution of a portion of a company's earnings, decided by the board of directors, to shareholders on a quarterly basis.
- Gain insight into the impact that dividends' information content has on stock market prices.
Verified Answer
SD
Simon DabadieMay 01, 2024
Final Answer :
True
Explanation :
The information content effect of dividends suggests that changes in dividend policy can signal management's view of future earnings prospects. When Telus omits its regular quarterly dividend, it may signal to investors that the company is not performing well or does not expect to perform well in the future, leading to a drop in share price.
Learning Objectives
- Gain insight into the impact that dividends' information content has on stock market prices.