Sweet treats pays a constant annual dividend of $2.38 a share and currently sells for $52.60 a share. what is the rate of return?

Given:

Annual dividend = $2.36 per share

Cost per share = $52.60

By definition, the rate of return is

r = (Vf - Vi) / Vi

where

Vi = initial investment

Vf = final value, including dividends.

Assume that the share price remains unchanged within the year. Then the final value is

Vf = 52.60 + 2.36 = $54.96

The initial investment is Vi = $52.60

The rate of return is

r = (54.96 - 52.60) / 52.60

= 0.04487

= 4.5% approximately

Answer: The rate of return is approximately 4.5%