A particular stock sells for $43.20 share and provides a total return of 11.6 percent. The total return is evenly divided between the capital gains yield and the dividend yield. Assuming a constant dividend growth rate, what is the current dividend per share? A. $2.24B. $2.37C. $2.34D. $2.51E. $2.47

Question

Autumn Lowe

Business

16 September, 01:05

A particular stock sells for $43.20 share and provides a total return of 11.6 percent. The total return is evenly divided between the capital gains yield and the dividend yield. Assuming a constant dividend growth rate, what is the current dividend per share? A. $2.24B. $2.37C. $2.34D. $2.51E. $2.47

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Answers (1)

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Kierra Salas · Answer 1

B. $2.37

Explanation:

The current dividend per share will be calculated using formula:

Po = [Do (1 + g) ] / (r - g)

Do = Po (r - g) / (1 + g)

Po = Current Share price

Do = Current dividend

r = Rate of return

g = growth of dividend

Do = ($43.20 * (0.116 - 0.058) / 1.058

Do = $2.37 per share