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All else being equal a poor set of results and lower dividends that aren’t bad as shareholders were expecting would probably have the following impact
P/E ratio Dividend yield
a)Increase Increase
b)Increase Decrease
c)Decrease Increase
d)Decrease DecreaseSir correct answer is B but please can you explain me?
The share price is always based on shareholders future expectations.
If they had been expecting worse dividends then the share price would have been low.
When the actual dividend turns out to be better, then their expectations get higher and the share price increases.
A higher share price results in a higher PE and a lower dividend yield.
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