Question

You bought a stock one year ago for $ 50.00 per share and sold it today for $ 55.00 per share. It paid a $ 1.00 per share dividend today.

a.What was your realized return?
b. How much of the return came from dividend yield and how much came from capital gain?

Answer 1

a. 12%

b. 2% and 10%

Step-by-step explanation:

a. The computation of the realized return is shown below:

= {(Ending share price - initial price) + Dividend} ÷ (Initial price) × 100

= {$1 + ($55 - $50)} ÷ $50

= 12%

b. The computation of the dividend yield and the capital gain is shown below:

Dividend yield

= (Dividend) ÷ (initial price) × 100

= $1 ÷ $50 × 100

= 2%

For capital gain yield:

= (Ending share price - initial price) ÷ (Initial price) × 100

= ($55 - $50) ÷ ($50) × 100

= $5 ÷ $50 × 100

= 10%