I think you've described a problem the company needs to resolve....

I think you've described a problem the company needs to resolve.

If the company is trading at a PE of 5 as you suggest and the company issues shares:
1. Existing shareholders are diluted if the PE of the acquisition is greater than 5
2. Shares are escrowed for a year or two, creating a potential overhang in one or two years time; a vendor is likely to demand a higher PE than 5 if they are escrowed for a year or two, especially if they are concerned about the rest of the company i.e. they lose out even if their own business performs well but the other businesses don't
3. Raises questions as to why a vendor would be happy to exit a business at a PE of 5 (why would they sell if they're receiving a yield of 20% per annum?) and not be able to cash out for one or two years

If the company pays in cash:
1. They need to fund it, either through their cash holdings, debt and/or issuing shares to parties besides the vendor
2. Their current cash holdings limit what they can pay in cash before going to other sources
3. I don't have a view on how much debt they can access
4. Given the costs of raising capital, to pay dividends and then ask for more capital back seems inefficient
5. Issuing shares is costly, but arguably has fewer problems than issuing shares to the vendor; a meaningful earn out arrangement usually provides enough incentive

So while I agree it depends on how they finance acquisitions, neither option is particularly appealing given their current circumstance.
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Let's assume the company pays 0.2c per share unfranked. This would be 9.1% gross yield, which is equivalent to full franked dividend yields of 6.4%. (I get that you don't have to pay tax in super, but converting dividends for like-for-like show the benefits of franking.) However, the problem as a non-holder is how sure am I that they'll deliver 0.2c even if they could?

In contrast, DDR (example of a different company / industry) is paying a trailing 6.4% full franked dividend and committed to higher dividends for the year ahead. I am much more certain they will pay out given their history of paying dividends (disc: also not held).
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This post continues to build a view as to "why is the market discounting or not recognising anywhere close to true value?" which was asked earlier in this thread.