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Expected returns, dividends, and growth The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required retum
Expected returns, dividends, and growth
The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required retum and dividend growth rate as follows:
widehat
Which or the following statements is true?
Increasing dividends may not always increase the stock price, because less earnings may be invested back into the rim and that impedes growth.
Increasing dividends will always decrease the stock price, because the fim is depleting internal funding resources.
Increasing dividends will always increase the stock price.
Walter Utilities is a dividendpaying company and is expected to poy an annual dividend of at the end or the year. ths dividend is expected to grow at a constant rate of per year. Ir Walter's stock currently tradus for $ per share. what is the expected rate of return?
in the future?
It wil derease.
It will star vie dine.
It will increase.
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