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Despite some theoretical assertions, many investors do care a great deal about dividends. They believe...

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Despite some theoretical assertions, many investors do care a great deal about dividends. They believe that sure dividends today (a bird in the hand) are less risky than a return in the form of capital gains in the future. The following table lists some factors that might affect an investor's preference for dividends. Indicate whether the given factors are likely to make an Investor prefer to receive more or fewer dividends. Investors will likely Prefer... More Dividends Fewer Dividends Factor with capital gains, shareholders in high tax brackets have the ability to defer taxes into the future. An investor is on a fixed Income and depends on returns from investment. Investors believe in the bird-in-the-hand theory In examining investors' preferences for dividends, it is useful to begin with the concept of dividend irrelevance Dividend irrelevance suggests that in a world with no taxes or brokerage (or transaction) costs, firms and investors are indifferent to the paying or receiving of dividende

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