how does a dividend affect P/E?
short answer, decreases P/E b/c as company pays dividend, the price is lower but the earnings stays the same, therefore numerator is lower, denomintor same, PE LOWER. now if we are talking about an academic discussion, I would say a dividend would not change P/E, as economically equilivents, investors could , sell part of their shares to create an artificial dividend for a company that currently does not pay one.
^^^^ I did not look at as gordon growth model g = earnings * (1-payout ratio), b/c i do not susbcribe to that… sorry gordon.
How’d your interview go 3?
I had one on tues…one today and four next week…and 2 the week after…shoot me these are ALL round one… so far so good…the interviews at this level of the game are more conversational and no HR BS which is so much better…
I think expected growth is (1-payout ratio)*roe, not *earnings. Also, gordon growth isn’t about how you compute growth, but how constant growth translates to discounted do dividends. The growth equation assumes that there are no diminishing returns to roe (i.e. You can keep investing retained earnings at the same returns no matter how much you’ve done already)
wow! You working while you do this? GL!
I’m doing an MBA - this is for grad recruitment.
atleast you didnt put your school as your username