Green Mountain Producers Inc. is an oil drilling company. the company paid a dividend of $3.10 last year, and, in the past, its dividend has increased steadily by about 4% a year. Green Mountain just announced that its dividend will increase to $4.20 this year, and its share price rose from $38 per share to $40 per share immediately after the announcement.
Which of the following best explains why Green Mountain's stock price increased as it did?
The clientele effect
Dividend irrelevance theory
The signaling hypothesis
Which of the following statements is true?
Taxes on dividend income are paid in the year that they are received.
Taxes on dividend income s are paid when the stock is sold.
As a result, the U.S. tax code encourages many individual investors to prefer to receive _
Some researchers and analysts have noticed a trend in which firms that increase their dividends see an increase in their stock price. the theory of_ explains this phenomenon.
In some cases, analysts notice that groups of similar investors tend to flock to stocks that have dividend policies consistent with their needs. This circumstance is an illustration of:______.
the information content effect
the clientele effect

This theory basically states that when a company announces higher dividends, it means that it is performing better than expected and the company's management believes that it will grow more in the future.

answer to the second question:

Taxes on dividend income are paid in the year that they are received.

Dividends are taxed as ordinary income, so they will be taxed on the year that they are received.

fill in the blanks:

As a result, the U.S. tax code encourages many individual investors to prefer to receive long term capital gains.

Some researchers and analysts have noticed a trend in which firms that increase their dividends see an increase in their stock price. the theory of signaling explains this phenomenon.

In some cases, analysts notice that groups of similar investors tend to flock to stocks that have dividend policies consistent with their needs. This circumstance is an illustration of: the clientele effect.