The PetroTracking and Extraction Ltd

Multiple Choice

The PetroTracking and Extraction Ltd.'s, a Calgary-based company, is experiencing double-digit growth in earnings. Given that its Board of Directors has adopted a traditional view of dividend policy, what should the company's dividend policy be?

A) Retain its earnings to provide shareholders with immediate capital gains.
B) Retain its earnings, to be used for immediate investment, to provide shareholders with greater future earnings.
C) Target a 15% dividend payout ratio to balance the conflicting needs of shareholders who want capital gains with those who want immediate income.
D) Target a maximum dividend payout to provide shareholders with cash now instead of in the future.
E) Decide on dividend levels in each period based primarily on the dividend policies of competing companies.