If D0 = $2.25, g (which is constant) = 3.5%, and P0 = $78, what's the stock's expected dividend...

Question:

If D0 = $2.25, g (which is constant) = 3.5%, and P0 = $78, what's the stock's expected dividend yield for the coming year?

Expected Dividend Yield:

The expected dividend yield is the expected rate of return a stock generates through dividend payments to shareholders. This return is part of the total rate of return on a stock.

Answer and Explanation:

We can use the following formula to compute the expected dividend yield:

  • expected dividend yield = current dividend *(1 + dividend growth) / current price
  • expected dividend yield = 2.25 *(1 + 3.5%) / 78
  • expected dividend yield = 2.99%

Learn more about this topic:

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What Is Dividend Yield? - Definition & Calculation

from Corporate Finance: Help & Review

Chapter 2 / Lesson 10
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