Explanation

Constant Dividend Payout Ratio Policy vs Stable Dividend Policy:

• Constant Dividend Payout Ratio Policy: Dividends fluctuate directly with earnings since the payout ratio remains constant. If earnings increase, dividends increase; if earnings decrease, dividends decrease.

• Stable Dividend Policy: Companies aim to maintain stable or gradually increasing dividends regardless of short-term earnings fluctuations. This creates more predictability for shareholders.

Therefore, compared to a stable dividend policy, a constant dividend payout ratio policy would most likely result in dividends fluctuating with earnings in the short term.