If the dividend growth rate increases for a firm,its P/E will ---------,other things the same.
A)increase
B)stay the same
C)decrease
D)increase or decrease but not stay the same

Question

Quizplus · Accepted Answer

When the dividend growth rate increases, it indicates that the firm is expected to have higher earnings growth in the future. This, in turn, can lead to a higher stock price, causing the P/E ratio to increase. Therefore, if the dividend growth rate increases for a firm, its P/E ratio will also increase, other things remaining the same.

If the Dividend Growth Rate Increases for a Firm,its P/E