Signaling Approach on Dividend Policy(redirected from Signalling Approach)
Signaling Approach on Dividend Policy
The belief that the amount per share a company pays in dividends is a strong indication of what the management believes about future earnings. For example, if the company pays $5 per share when it had paid $8 per share the previous time dividends were disbursed, shareholders may take this as a signal that the management believes that earnings will soon decline. Some investors may use the signaling approach on dividend policy as a means to determine whether to buy or sell a stock.