Hi bloodline, S2000magician,
Speaking about retention (and dividend payout) ratios, could you please confirm whether D1/E1 = D0/E0 always needs to hold with a single constant long-term growth rate (g)? I recently ran into a problem where both a current and long term divident payout ratio were defined, along with only one assumed long-term growth rate. This seemed wrong to me, as in this case 1-b is not constant (D1/E1 is not equal to D0/E0) and the below equations do not hold:
Justified Trailing PE = 1-b(1+g)/r-g
Justified Forward PE = 1-b/r-g
Thanks a lot for your help in advance.