Sustainable Growth Rate Formula Excel Template

Prepared by Dheeraj Vaidya, CFA, FRM

dheeraj@wallstreetmojo.com

visit - www.wallstreetmojo.com
Let’s assume some numbers in the table below for the calculation of the sustainable growth rate for two
companies. Calculate the sustainable growth rate for these two arbitrary companies.

Company A B
Earnings per share $4 $5
Dividends per share 1.5 2
Return on equity 14% 10%

Retention Ratio for Company A 0.63

Sustainable growth rate for company A 8.8%

Retention Ratio for Company B 0.60

Sustainable growth rate for company B 6.0%
The sustainable growth rate formula for Reliance Industries. The table below depicts the dividend,
earnings per share and the return on equity for reliance industries.

Headings Ratios
Earnings per share Rs. 56
Dividends per share 6
Return on equity 12%

Retention ratio for Reliance Industries 0.89

Sustainable growth rate 11%

The sustainable growth rate for Tata Steel. The table below depicts the dividend, earnings per share and the
return on equity for Tata Steel.

Headings Ratios
Earnings per share Rs. 75
Dividends per share 9.4
Return on equity 23%

Retention ratio for Tata Steel 0.87

Sustainable growth rate 20%

r share and the