Which corporate action directly signals the possibility of higher shareholder cash returns through regular payments?

• A. Repurchase of stock
• B. Increase in dividend
• C. Issuance of preferred stock
• D. Stock split

Answer: (B)

The action that directly signals higher cash returns to shareholders through regular payments is increasing the dividend. Dividends are cash distributions paid on a regular schedule, so boosting the dividend communicates the company expects to generate more cash and is committed to sharing more of it with shareholders on an ongoing basis.

Repurchasing stock also returns cash to shareholders, but not as a guaranteed, regular payment; buybacks can be irregular and don’t create a steady cash flow stream. Issuing preferred stock changes the capital structure and may introduce fixed payments to preferred holders, not to common shareholders’ regular cash returns. A stock split adjusts the number of shares without any cash transfer, so it doesn’t affect cash payments to shareholders.