Multiple Choice Question

How can a low dividend payout increase future returns on equity $($ROE$)?$

A low dividend payout means profits are declining which will lower, not increase, future returns on equity

A low dividend payout decreases equity and increases the ROE.

A low dividend payout means more of a firm's earnings are retained for future growth, which is expected to increase earnings and ROE.

A low dividend payout means a low market price per share which increases ROE.