The correct answer is D. All of the above.
A passive dividend policy is a policy in which a company pays out a dividend that is a fixed percentage of its earnings per share (EPS). This type of policy is often used by companies that want to maintain a steady dividend stream for their shareholders.
A constant dividend policy is a policy in which a company pays out a dividend that is a fixed amount, regardless of its earnings. This type of policy is often used by companies that want to provide their shareholders with a predictable income stream.
A policy of paying dividends after retaining profits for reinvestment is a policy in which a company pays out dividends only after it has retained a certain amount of profits for reinvestment in the business. This type of policy is often used by companies that are growing rapidly and need to reinvest their profits in order to maintain their growth.
All of these policies can be considered passive dividend policies because they do not involve any active management of the dividend level. Instead, the dividend level is determined by a formula or a set of rules that are applied automatically. This makes passive dividend policies a relatively simple and low-cost way for companies to manage their dividends.
However, passive dividend policies also have some drawbacks. One drawback is that they can be inflexible. If a company’s earnings decline, it may not be able to pay out the same level of dividends as before. This can disappoint shareholders and lead to a decline in the company’s share price.
Another drawback of passive dividend policies is that they can be inefficient. If a company has a lot of excess cash, it may be better to use that cash to repurchase shares or invest in new projects, rather than paying it out as dividends.
Overall, passive dividend policies can be a good option for companies that want to provide their shareholders with a steady income stream. However, companies should carefully consider the pros and cons of passive dividend policies before adopting one.