The dividend growth is 10.5%.
Given ROE of 15% and dividend of 30%.
Dividend growth rate is to be computed.
The dividend growth rate is the annualized percentage rate of growth of a specific stock's dividend over time. Many established organizations strive to raise dividends given to shareholders on a regular basis. When utilizing a dividend discount model to value equities, the dividend growth rate must be calculated.
A track record of substantial dividend growth may indicate that future dividend increase is expected, which can indicate long-term profitability.
The formula to compute the dividend growth rate (DGR) is given below:
DGR = ROE×(1-payout ratio)
Substitute values in the formula given above to find the DGR.
DGR = 15%×(1-30%)
=15% × 0.70
=0.105 or 10.5%
Dividend payout ratio "DGR" = 10.50%
Therefore, the dividend payout ratio is c. 10.50%
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