Question

If D0 = $2.25, g (which is constant) = 3.5%, and P0 = $54, then what is the stock's expected dividend yield for the coming year? a. 3.45% b. 4.23% c. 3.75% d. 4.31% e. 5.05%

Answer 1

Answer: d. 4.31%

Step-by-step explanation:

Dividend yield is calculated by dividing the dividend by the price of the stock.

The dividend in the coming year given the growth rate is:

= 2.25 * (1 + 3.5%)

= $‭2.32875‬

The dividend yield is therefore:

= ‭2.32875‬/54

= ‭0.043125‬

= 4.31%