luda002

I think the thing to remember is that everything is related, those two equations are not isolated from one another. Meaning if you're dividend payout ratio increases it will effect your growth rate too, the two variables have to move together. So, take the leading P/E equation, if your payout ratio increases, i agree it increases the value of the numerator, but it also has to change the growth rate in the denominator, so it's not given that it leads to higher P/E

Dreary makes an excellent point as well.