The dividend growth is commonly expressed by the Sustainable Growth Rate equation expressed as: g = ROE x Retention Ratio.
Recall that the retention ratio (b) is the plowback or earnings retention, which is sometimes referred to as b or B. Therefore g = ROE x B. In 2008 the MKA Corporation reports EPS of $5.75, ROE equals 15% and the company has a dividend payout ratio of 60%. Calculate the dividend growth rate.
Dividend Growth Rate is g = ROE x B