share of stock is the dividend growth, or growing perpetuity, model. Consider the following: The dividend payout ratio is 1 minus b, where b is the retention, or plowback, ratio. So, the dividend next year will be the earnings next year, E, times 1 minus the retention ratio. The most commonly used equation to calculate the sustainable growth rate is the return on equity times the retention ratio. Substituting these relation- ships into the dividend growth model, we get the following