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20 September, 17:38

The next dividend payment by Wyatt, Inc., will be $2.80 per share. The dividends are anticipated to maintain a growth rate of 7.25 percent, forever. Assume the stock currently sells for $49.20 per share

Requirement 1: What is the dividend Yield?

Requirement 2: What is the expected capital gains Yield?

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  1. 20 September, 20:37
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    Dividend yield formula = Dividend / Price

    Dividend = $2.80

    Price = $49.20

    Dividend yield = 2.80/49.20 = 0.0569

    Dividend yield = 5.69%

    Capital gains yield (CGY) = Next year's price-Current price / current price

    Next year's price (P1) = 49.20 * (1+0.0725)

    P1 = $52.77

    CGY = (52.77-49.20) / 49.20

    CGY = 3.57/49.20

    CGY = 0.0726

    Therefore, capital gains yield = 7.26%
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