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Generally, high growth stocks pay:Group of answer choiceslow or no dividends.decreasing dividends.erratic dividends.high, steadily growing dividends.

Question

Generally, high growth stocks pay:

  • low or no dividends.
  • decreasing dividends.
  • erratic dividends.
  • high, steadily growing dividends.
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Solution

Generally, high growth stocks pay low or no dividends.

Here's why:

  1. High growth companies are typically in a phase of their business cycle where they are focused on reinvesting all of their earnings back into the company to fuel further growth.

  2. These companies are often in competitive industries where they need to continuously innovate and expand to maintain their growth rates. This requires significant capital, which is why they choose to reinvest their earnings rather than distribute them as dividends.

  3. Paying dividends is also a signal to investors that the company has matured and moved past its high growth phase. High growth companies want to avoid sending this signal to the market.

  4. Therefore, it's common for high growth stocks to pay low or no dividends.

This problem has been solved

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