Dividend growth is a function of
A) return on equity.
B) the retention rate.
C) the payout ratio.
D) all of the above.
E) none of the above.

Question

Quizplus · Accepted Answer

Dividend growth is affected by all the factors listed. A company's return on equity determines how much profit it generates, which is a key determinate of how much of that profit can be paid out in the form of dividends. The retention rate measures how much of a company's net income is being reinvested back into the business rather than being paid out as dividends. A low retention rate can lead to higher dividend growth, while a high retention rate can lead to slower dividend growth. Finally, the payout ratio measures the percentage of a company's earnings that are being paid out as dividends. Higher payout ratios typically lead to slower dividend growth, as the company is paying out more of its earnings in the form of dividends, leaving less room for growth.

Dividend Growth Is a Function of