Module 4 Quiz

In the long run, which is usually more advantageous?

A company with high but stagnant dividends A company with consistent dividend growth A company that issues only special dividends A company that pays no dividends at all

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Which of the following is a red flag for a possible dividend cut?

Decreasing debt levels Increasing profit margins Expanding into new markets Rising payout ratio and dropping revenue

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If one sector grows to 40% of your portfolio due to DRIP purchases, what should you do?

Sell some shares and rebalance into other sectors Buy more of the same sector Stop reinvesting dividends entirely Withdraw dividends as cash immediately

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Why might DRIPs cause a portfolio to drift away from diversification?

They automatically add shares of the same company They randomly buy new companies without approval They prevent you from withdrawing dividends as cash They increase your tax liability compared to manual reinvestment

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Suppose you invest in a stock yielding 4% but with no dividend growth. After 20 years, how will your income compare to a stock yielding 3% with 6% annual growth?

The 4% stock produces more income long-term They produce about the same income The 3% growth stock overtakes and produces more long-term income Neither is good for dividend investors

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During a recession, what is the safest approach for dividend investors?

Sell all stocks immediately and hold only cash Monitor company fundamentals and rebalance if sectors shift Buy only the highest-yielding stocks available Ignore your portfolio completely until recovery

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Why might an investor want to rebalance after a sector has done very well?

To sell winners and shift into underweighted sectors To double down and increase holdings in the strong sector To stop paying taxes on capital gains To eliminate dividends from other sectors

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