Comment on the following: A stable dividend policy is always preferable to fluctuating dividend policy.

A stable dividend policy is always preferable to fluctuating dividend policy. A dividend announcement by the company carries a lot of information about the performance of the company. Stable dividend policy conveys the idea that the operations of the company are stable and in comfortable position. A fluctuating dividend implies that the company is not able to maintain the performance. Shareholders and investors prefer a company which has a stable dividend policy so that they are sure about the quantum of their dividend income and they can plan for the reinvestment of this income. Generally, the organisations which deal in necessities suffer less from fluctuating incomes than those organisations which deal with fancy or luxurious goods.