alleryStart learning →What does a dividend reinvestment plan allow shareholders to do?
ASell shares at a premium
BUse dividends to buy more stock
CDefer paying tax on all gains
DConvert shares into debt
Answer & Solution
Correct answer: B. Use dividends to buy more stock
Dividend reinvestment plans let holders use dividends to systematically buy small amounts of stock.
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Related questions
Which limits can restrict how much a firm may distribute as dividend?Why might management avoid changing dividend policy abruptly?Which alternative to cash dividends may a firm choose when surplus cash exists?Which type of shareholder usually prefers earnings to be retained?With no NPV-positive projects and surplus cash, what should management do?Management knowing more than the market is called what?If dividends bear higher tax than gains, raising them does what to value?Per the Modigliani-Miller theorem, dividend policy has what effect on firm value?