Question

In: Finance

what's the formula for calculating negative dividend growth rate? normally the growth rate is positive and...

what's the formula for calculating negative dividend growth rate?

normally the growth rate is positive and I do not know how to calculate if it is negative

thankyou!

Solutions

Expert Solution

When there is reduction in the value of the dividend from the past payments of the dividend, then there would be a negative dividend payments growth rate.

so it is generally to be associated with A reduction in the payment of dividend because either the company is not able to make the profits, or the company is deciding against payment of the dividend and investing into the projects of the business because they are generating higher rate of return.

So, it can be said that when the dividend payout ratio is decreasing then there would be decrease in the growth rate of the dividend.

It can be calculated by ascertainment of the dividend of the current period which is reduced, and it is to be subtracted by the previous dividend, and there should be a percentage assigned with that.

there are no proper models to follow up with negative dividend payments but it can be customised in nature according to the need of the the investor.


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