Question

A reduction in dividend is interpreted by investors as

Answer 1

A dividend yield tells you how much income you receive in relation to the price of the stock. Trouble comes when a company lowers its dividend. The market will often anticipate this move, and the stock price will drop before the company announces its plans to lower the dividend.

Answer 2

Answer:

signals that the firm is not expecting to do well

Explanation:

Markets interpret decreased dividends as signals that the firm is not expecting to do well, which of course sends the stock price lower. Increased dividends on the other hand generally send stock prices higher. ... The investment decisions of the firm are unaffected by its dividend policy.