Low P/E stocks indicate that the firm distributes a large proportion of its earnings as cash dividends.

Question

Low P/E stocks indicate that the firm distributes a large proportion of its earnings as cash dividends.​

Quizplus · Accepted Answer

Low P/E stocks indicate that the price of the stock is low compared to the earnings per share, but it does not necessarily indicate anything about the company's dividend policy. A company can have a low P/E ratio and not pay any dividends, or it can have a high P/E ratio and pay high dividends. P/E ratio is just one measure of a company's valuation and should not be used in isolation to determine dividend payouts.

Low P/E Stocks Indicate That the Firm Distributes a Large