What is one potential market perception impact of a company that issues debt solely for dividends?

When a company issues debt solely for the purpose of paying dividends, it may raise concerns about the sustainability of the business. This action can signal to investors that the company is not generating sufficient cash flow from its operations to support dividend payments. Consequently, reliance on borrowed funds to reward shareholders could indicate underlying financial instability and risk.

Investors may perceive this strategy as a sign that the company is prioritizing short-term shareholder returns over long-term financial health. If the market believes that the company cannot sustain its dividend payments without incurring debt, it may lead to a decrease in investor confidence, and possibly a decline in stock price. Thus, concerns about sustainability arise because the company could face difficulties in servicing its debt or ultimately reduce or eliminate dividends if future profits do not materialize.

The other choices reflect more positive perceptions, which may not align with the reality of a company's financial decisions when it is issuing debt for dividends.