Explanation:

Option C is correct because:

• When a company has more profitable investment opportunities (positive NPV projects), it will retain more earnings to fund these investments
• This leads to a lower dividend payout ratio as more earnings are reinvested in the business
• The company prioritizes growth opportunities over returning cash to shareholders

Lower flotation costs (Option A) make external financing cheaper, which might actually allow for higher dividends. Lower earnings volatility (Option B) typically allows for more stable or higher dividends.