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Critically evaluate Geoff Scott’s argument that shareholders are expecting a dividend and if not paid one...

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.

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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

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