Dividend growth is a function of
A) Return on equity.
B) The retention rate.
C) The payout ratio.
D) All of the above.
E) None of the above.

Question

Quizplus · Accepted Answer

Dividend growth is a function of all of the above factors - return on equity, retention rate, and payout ratio. The return on equity determines the profitability of the company, which affects the dividend payment capacity. The retention rate, which is the portion of earnings not paid out as dividends, determines the level of reinvestment in the company, which affects future growth and dividend payments. The payout ratio, which is the percentage of earnings paid out as dividends, determines the amount of funds available for dividend payments and future growth. Therefore, all three factors are important considerations in dividend growth.

Dividend Growth Is a Function of