Question

Shares of common stock of the Samson Co. offer an expected total return of 13.00 percent. The dividend is increasing at a constant 5.40 percent per year. The dividend yield must be:

Answer 1

the dividend yield is 7.60%

Step-by-step explanation:

The computation of the dividend yield is shown below:

As we know that

Required return = Dividend yield + Capital Gain Yield or growth rate

13% = Dividend yield + 5.4%

So, the dividend yield is

= 13% - 5.4%

= 7.60%

Hence, the dividend yield is 7.60%

We simply applied the above formula so that the dividend yield could come