Question

Next dividend payment = $1.87 per share

anticipated growth rate of 4.3%
stock currently sells for $37 per share
3. Stock Values For the company in the previous problem, what is the dividend yield? What is the expected capital gains yield?

Answer 1

The dividend yield of the stock is 5.054%, calculated by dividing the dividend payment of $1.87 by the stock price of $37. The expected capital gains yield is 4.3%, which is the anticipated growth rate of the dividends.

Step-by-step explanation:

To calculate the dividend yield, we divide the next dividend payment by the current stock price. So, dividend yield = $1.87 / $37 per share = 0.05054 or 5.054%. The capital gains yield is anticipated to be equal to the growth rate of the dividends. Therefore, the expected capital gains yield is 4.3%.

To provide further context, the dividend yield is a financial metric that shows how much a company pays out in dividends each year relative to its stock price. When considering investment opportunities, both the dividend yield and expected capital gains yield are important, as they represent the income and growth aspects of stock returns.

Answer 2

The dividend yield is calculated by dividing the annual dividend payment by the current stock price, which in this case results in a 5.054% yield. The expected capital gains yield corresponds to the anticipated growth rate of the dividends, here it is 4.3%.

Step-by-step explanation:

To calculate the dividend yield for the company mentioned, you would divide the next dividend payment by the current stock price. The next dividend payment is $1.87 per share, and the stock currently sells for $37 per share. Therefore, the dividend yield is calculated as follows:

$1.87 ÷ $37 = 0.05054 or 5.054%

The expected capital gains yield is anticipated based on the expected growth rate of the dividends, which is given to be 4.3% in this case. This is because the price of a stock is theoretically based on the present value of all future dividend payments, and as those dividends grow, so should the stock price, all else being equal.