A particular stock has a dividend yield of 1.2 percent. Last year, the stock price fell from $73 to $57. What was the return for the year?
The dividend yield is a ratio of the dividend per share of a stock relative to the stock's market price and it is a part of the total return from the investment in stock other than the capital gains yield and which is the return in the form of appreciation in the value of the stock. The sum of the dividend yield and the capital gains yield is the total return.
Answer and Explanation:
The return for the year was -20.72%
As per the data:
- Stock's dividend yield = 1.2%
- Stock price decreased from $73 to $57 last year.
The return from the stock comprises of the capital gains and the dividend income.
- Capital gains yield = (Sale price - Purchase price) / Purchase price
- Capital gains yield = ($57 - $73) / $73
- Capital gains yield = -21.92%
- Return for the year = Capital gains yield + Dividend yield
- Return for the year = -21.92% + 1.2%
- Return for the year = -20.72%
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from Corporate Finance: Help & ReviewChapter 2 / Lesson 10