Final answer:
The optimal dividend policy for a firm is one that maximizes the firm's stock price by balancing dividends and capital gains to provide a return to investors.
Step-by-step explanation:
A characteristic of a firm's optimal dividend policy is that it maximizes the firm's stock price. When a firm decides to issue stock, investors expect a certain rate of return, which can be delivered through dividends or capital gains. Dividends are direct payments to shareholders, while capital gains are realized when the stock's sale price exceeds the purchase price.
The decisions about whether to issue stock, pay dividends, or reinvest profits are made by firms, which can be either private or public entities. An optimal dividend policy aims to enhance shareholder value by balancing these factors and optimizing the stock price.