Which of the following statements is correct?
A. One advantage of the residual dividend policy is that it leads to a stable dividend payout, which investors like.
B. An increase in the stock price when a company decreases its dividend is consistent with signaling theory as postulated by MM.
C. If the "clientele effect" is correct, then for a company whose earnings fluctuate, a policy of paying a constant percentage of net income will probably maximize the stock price.
D. Stock repurchases make the most sense at times when a company believes its stock is undervalued.
E. Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above average payout ratios.
Answer: D
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