Question

If D1 = $1.25, g (dividend growth rate) = 4.7%, and P0 = $26.00, what is the stock’s expected dividend yield for the coming year

Answer 1

9.51%

Step-by-step explanation:

From the question above:

The dividend is $1.25

The growth rate is 4.7%

= 4.7/100

= 0.047

The stock price(PO) is $26.00

Therefore, stock's expected dividend for the coming year can be calculated as follows

PO= D1/Re-g

26= 1.25/(Re-0.047)

Cross multiply both sides

1.25= 26(Re-0.047)

1.25=26Re-1.222

1.25+1.222=26Re

2,472=26Re

Re= 2,472/26

Re= 0.0951×100

Re= 9.51%

Hence the stock's expected dividend for the coming year is 9.51%