Question

Critically evaluate Geoff Scott’s argument that shareholders are expecting a dividend and if not paid one the share price will suffer. Does he have a point? Please explain.

Answer #1

Yes, the share price will fall because of following
reasons

1. When the company does not meet the expectation of share holders
then price falls. This happens with case of dividend , earnings or
profit estimate.

2. Dividends provide immediate returns to shareholders whereas
reinvestment return or capital gain returns is received at the
future. Hence by not paying dividends the market reacts negatively
immediately.

Please Discuss in case of Doubt

Best of Luck. God Bless

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