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Midnight Oil Ltd just announced that they would halve their dividend and as a result their...

Midnight Oil Ltd just announced that they would halve their dividend and as a result their share price rose. Explain why this may occur.

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Midnight Oil Ltd is from an Oil and Gas industry which are considered to be highly volatile as it depends on the supply of crude oil and natural gas.  On the announcement that company will halve their dividend, their share prices rose as more investors would like to invest in it's share. Halve the dividend may indicate that company may retain the earnings for reinvestment in drilling, production and distribution of oil. Investor's are ready to buy stocks at premium before the ex dividend date to earn the dividend and capital gain. Delaration of dividends indicate that company is profitable and more investors would like to hold the companies shares to earn capital gain plus dividend.

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