Retention Dividend Growth

Retention Dividend Growth

The retention of profit results in dividend growth. the dividend growth is calculated by multiplying the proportion of retention with the rate of return on investment . The formula may be narrated as under

Growth = Rate on investment x Proportion of retention

 Retention Dividend Growth Example

ABC Company retained 20% of its profit and the rate of return on investment is 12%. Calculated the dividend growth rate?

Solution

Growth = Rate on investment x Proportion of retention

= 20% x 12%

= 2.4%