If a Firm Follows a Stable Dividend Policy While Its

Multiple Choice

If a firm follows a stable dividend policy while its earnings are growing and no new stock has been issued, what would happen to the firm's dividend payout ratio over time?

A) The payout ratio will decrease.
B) The payout ratio will increase.
C) The payout ratio will decrease initially and then increase.
D) The payout ratio will remain stable and not change.