The growth rate of dividends cannot be permanently greater than the required rate of return.

Question

Quizplus · Accepted Answer

If the growth rate of dividends were permanently greater than the required rate of return, it would imply an unrealistic scenario where the stock's price grows to infinity, which is not sustainable or practical in financial markets. The required rate of return must be higher to compensate investors for the risk of investing.

The Growth Rate of Dividends Cannot Be Permanently Greater Than