The "bird-in-the-hand" dividend theory suggests that

Question

A) high dividends increase stock value because shareholders are more certain of the dividend
yield than of potential future capital gains.
B) high dividends decrease stock value because dividend payments take money out of the
corporate "nest" and reduce the ability of the corporation to function effectively.
C) high dividends increase stock value because capital markets are inefficient and dividends are
the only sure way to get money from an equity investment.
D) high dividends increase stock value because shareholders believe they can earn a higher
return than the company.

Answer 1

A