Question

Suppose a stock had an initial price of $70 per share, paid a dividend of $2.30 per share during the year, and had an ending share price of $55. Compute the percentage total return, dividend yield, and capital gains yield. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Percentage total return is - 18.14 %

Dividend yield is 3.29 %

Capital gains yield is -21.43%

Step-by-step explanation:

Percentage return = (Dividends paid at end of period + Change in market value over period) ÷ Beginning market value

Percentage total return (R) = [$2.30 + ($55 - $70)] ÷ $70 = - 18.14 %

Dividend yield = Annual Dividend payout ÷ current stock price

Dividend yield = $2.30 ÷ $70 = 3.29 %

Capital gains yield =
`(P1 - P0)/(P0)`

P0 = Initial stock price

P1 = Stock price after
`1^{st` period

Capital gains yield = ($55 - 70) ÷ $70 = -21.43%