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11 June, 20:28

If D0 = $2.25, g (which is constant) = 3.5%, and P0 = $54, then what is the stock's expected dividend yield for the coming year?

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Answers (1)
  1. 11 June, 20:51
    0
    4.31%

    Explanation:

    The computation of the expected dividend yield is shown below:

    As we know that

    Dividend yield = (Annual dividend : Market price) * 100

    where,

    Annual dividend would be

    = $2.25 + $2.25 * 3.5%

    = $2.25 + 0.07875

    = $2.32875 per share

    And, the market price is $54 per share

    So, the expected dividend yield is

    = ($2.32875 per share : $54 per share) * 100

    = 4.31%
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