Bennett Corp did well this year. Its industry is booming and everyone expects it to continue to do so. Bennett paid a dividend that was 15% higher than last year's. Surprisingly the price of Bennett's stock dropped immediately after the dividend was announced. What's going on?

A) Stockholders are cashing in on the good times and taking their profits while they can.
B) Investors expected a bigger dividend increase, which was factored into the stock's price. They were disappointed by a mere 15%, and adjusted their opinions of the stock downward.
C) Nothing unusual is going on. Stocks move up and down, sometimes randomly. In this case the dividend just happened to coincide with a brief downturn.
D) Investors probably expected a stock split and were disappointed when they didn't get it.

Question

Dominique Oglesby · Accepted Answer

Final Answer : B, Explanation :  Investors may have already factored in a higher dividend increase into the stock's price, leading to disappointment and a downward adjustment of their opinions of the stock.

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