Question

Suppose a stock had an initial price of $119 per share, paid a dividend of $3.20 per share during the year, and had an ending share price of $150.

Requirement 1:
Compute the percentage total return.

Requirement 2:
What was the dividend yield?

Requirement 3:
What was the capital gains yield?

Answer 1

The percentage total return for the stock is approximately 28.74%, the dividend yield is about 2.69%, and the capital gains yield is approximately 26.05%.

Step-by-step explanation:

Calculating Stock Returns

To compute the percentage total return for a stock, we sum the dividend received and the capital gain (or loss) and then divide by the initial stock price. For a stock with an initial price of $119, a dividend of $3.20, and an ending price of $150:

• The dividend yield is the percentage return from the dividend alone:

Dividend Yield = (Dividend / Initial Price) x 100 = ($3.20 / $119) x 100 ≈ 2.69%

The capital gains yield is the percentage increase in stock price alone:

Capital Gains Yield = (Capital Gain / Initial Price) x 100 = ($31 / $119) x 100 ≈ 26.05