Hi,
In the second set of the assessments for corp finance, one question asks if the dividend policy is stable or constant.
It is indeed a constant payout ratio, so according to the curriculum i chose the option “Stable”. The answer turned out to be “Constant” !
I mean, isn’t
constant $ = Constant
constant % = Stable
Please anyone shed some light on this for me !
Constant = same Div in $
Stable = Same payout ratio in %
After some additional research in the curriculum, here’s what i found :
Sable policy => use the Target formula
Constant policy => constant % payout ratio
Interesting approach.
Perhaps more people ought to try that.
At this point i am only refering to the curriculum ! For any other CFA exam that i will study for, I think i will not use any third-party material again. 3rd party often skip or summarize concepts so much !
Its constant dividend pay out ratio when you take dividend/Net income when it gives you a constant figure across all years then its a constant divident pay out ration and not stable because the fomula ration you have used is for constant dividend payout ratio