Based on the dividend growth model,a lower current payout will not affect the stock price,provided that the:
A) required return on the stock is proportionately increased.
B) growth rate in dividends remains constant.
C) reduction is offset by an increase in the growth rate.
D) growth rate is decreased by the percent decrease in the dividend.

Question

Quizplus · Accepted Answer

A lower current payout can be offset by an increase in the growth rate, as the dividend growth model values a stock based on future dividends and their growth.

Based on the Dividend Growth Model,a Lower Current Payout Will