Question

A stock is expected to maintain a constant dividend growth rate of 4.2 percent indefinitely. If the stock has a dividend yield of 5.5 percent, what is the required return on the stock

Answer 1

Answer:

Explanation:

Required return = (dividend / price per share) + constant growth rate.

Dividend yield on the stock =  (dividend / price per share) = 5.5%

Therefore, Required return = 5.5% + 4.2% = 9.7%