Voyage Company is in a very high growth industry while EZgoing Company is in a low growth industry.Comparing their dividend payout ratios we would expect:
A)Voyage's dividend payout ratio to be greater than EZgoing.
B)Voyage's dividend payout ratio to be less than EZgoing
C)The two firms to have the same dividend payout ratio
D)Cannot compare them as they are in different industries.

Question

Quizplus · Accepted Answer

Companies in high growth industries typically reinvest their profits into the company to fuel further growth, so they have lower dividend payout ratios. Conversely, companies in low growth industries have fewer investment opportunities and may have higher dividend payouts to attract investors. Therefore, Voyage Company's dividend payout ratio would be expected to be less than EZgoing Company's.

Voyage Company Is in a Very High Growth Industry While