An increase in PVGO will almost always coincide with a decrease in dividends.

Question

Quizplus · Accepted Answer

PVGO (Present Value of Growth Opportunities) measures the value of a company's future growth prospects. If a company decides to invest more in its growth opportunities, such as through research and development or expanding into new markets, it may choose to retain more earnings and reinvest them back into the business rather than paying them out as dividends. This can lead to a decrease in dividend payouts, while increasing the PVGO. Conversely, if a company decides to prioritize dividend payments and distribute more earnings to shareholders, it may have a lower PVGO. Therefore, an increase in PVGO will almost always coincide with a decrease in dividends.

An Increase in PVGO Will Almost Always Coincide with a Decrease