What is the formula for calculating the expected annual rate of growth in dividends (g) according to the chapter on stock valuation?

The formula for calculating the expected annual rate of growth in dividends (g) is g = Retention Ratio (b) * Rate of Return on Equity (ROE).

This formula indicates that the growth rate in dividends is determined by the proportion of earnings that the firm retains for reinvestment (the retention ratio) multiplied by the rate of return the firm expects to earn on those retained earnings (ROE). This relationship helps analysts forecast future dividend growth based on the firm's reinvestment strategy and profitability.