The growth rate in dividends is a function of two ratios. They are:
A) ROA and ROE.
B) Dividend yield and growth rate in dividends.
C) ROE and the Retention Ratio.
D) Book value per share and EPS.

Question

Quizplus · Accepted Answer

The growth rate in dividends is directly related to the retention ratio, which determines the portion of earnings that the company retains for reinvestment, and the return on equity (ROE), which measures the profitability of that reinvestment. Therefore, ROE and the retention ratio are the two ratios that influence dividend growth rate.

The Growth Rate in Dividends Is a Function of Two