CANADIAN TIRE- Part 7 of 11

A young investor who prioritizes long-term growth over income is selecting stocks for her portfolio. She is comfortable with volatility and wants companies that reinvest aggressively in itself. If Walmart Dividend Payout Ratio is 5%, then investors would choose:

Question

CANADIAN TIRE- Part 7 of 11

A young investor who prioritizes long-term growth over income is selecting stocks for her portfolio. She is comfortable with volatility and wants companies that reinvest aggressively in itself. If Walmart Dividend Payout Ratio is 5%, then investors would choose:

BlackTom AI · Accepted Answer

This question contrasts two stocks in the context of a growth-oriented investor who prioritizes long-term expansion and is comfortable with volatility.
Option 1: Walmart. Since the prompt states a low dividend payout ratio of 5%, this signals that Walmart returns a small portion of earnings as dividends and reinvests the rest back into the business. For a growth-focused investor, a company that reinvests earnings aggressively is preferable because reinvestment can fuel future earnings growth, expansion, and capital gains.
Option 2: Canadian Tire. If Canadian Tire offers a dividend payout that is comparatively higher or more stable, it would be more attractive to income-seeking investors who prioritize current cash flow from dividends rather than aggressive reinvestment for growth. For a long-term growth investor who favors reinvestment, a higher payout could imply less earnings retained for growth, making Canadian Tire a less suitable choice in this framing.
Reasoning about the preference: a 5% payout ratio suggests a company prioritizing reinvestment over distributing profits as dividends, which aligns with growth investors looking for capital appreciation rather than income. Therefore, the stock described with such a low payout (Walmart) fits the growth-oriented profile better than a stock that would satisfy income-seeking criteria (potentially Canadian Tire, depending on its payout policy).
In summary, the reasoning supports selecting Walmart for an investor aiming for long-term growth through aggressive reinvestment, while Canadian Tire would be more aligned with those seeking regular dividend income rather than growth-driven capital gains.

COMM_V 293 101 102 103 2025W1 2025 W1 COMM 293 FINAL Exam- Dec. 17 8:30 AM - 11:00 AM PST - Requires Respondus LockDown Browser

CANADIAN TIRE- Part 7 of 11 A young investor who prioritizes long-term growth over income is selecting stocks for her portfolio. She is comfortable with volatility and wants companies that reinvest aggressively in itself. If Walmart Dividend Payout Ratio is 5%, then investors would choose:

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