Question

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?

Answer 1

Answer:

Explanation:

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%