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If investors prefer firms that retain most of their earnings,then a firm that wants to maximize...

If investors prefer firms that retain most of their earnings,then a firm that wants to maximize its stock price should set a low payout ratio.
True or False?

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Answer #1

TRUE

DIVIDEND PAYOUT RATIO:

Dividend payout ratio measures the percentage of earning paid annually to shareholders as dividend.

Dividend payout ratio= Annual dividend per share /

Earning per share

WHY SHOULD DIVIDEND PAYOUT RATIO IS LOW?

Many type of companies tend to attract growth investor who are more interested in profit maximization from rise in share price and less interested in dividend income so, that's why many of companies have low dividend payout ratio.

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