I think it is a typo - "A company's dividend policy also determines its PE. The greater the proportion of profit given as dividends, the higher will be the PE."
As teh EPS is the denominator, the higher the payout by the company, the PE would be lower for the same market price of the scrip.
Re: PE Ratio
by surender kumar on Nov 14, 2010 12:04 AM
no, i think you got it wrong. Though it's more complicated. Dividend is given out from the profits and so the eventual EPS goes down. So PE will go up. But besides this mathematical analysis, in practice, it has been seen that whenever a dividend payout happens the share price also falls.
