This is a dumb question, but… Is Net Income affected by dividend payout? Is EPS affected by dividend payout? Is anything affected?
Retained Earnings is. NI - Dividends Paid + Beginning Balance of Retained Earnings + Common Stock issued in Period = Ending Balance of Retained earnings.
Neither net income nor earnings per share is affected by dividend payout. The payout ratio does have some impact though: - a higher payout ratio means a lower growth rate - a higher payout ratio means a lower P/E multiple provided that ROE is higher than k. - a higher payout ratio means a higher P/E multiple if ROE is lower than k (better to give money to shareholders than destroy value). - the payout ratio is irrelevant if ROE is the same as k. - retained earnings in the next period is equal to retained earnings in the last period plus net income plus common stock issuance minus dividends.