Question

Josh purchased 100 shares of XOM at the beginning of 2016. He received dividends per share of​ $1.37 (2016),​ $1.55 (2017),​ $1.66 (2018),​ $1.74 (2019),​ $1.85 (2020). At the end of​ 2020, just after receiving the last​ dividend, he sold the stock for​ $84.76. At what rate did the dividends grow from the end of 2016 to the end of​ 2020? Assume that all dividends were received at the end of the year.

Answer 1

Answer: 7.80%

Explanation:

At the end of 2016, Josh received a dividend of $1.37 and at the end of 2020, he received one of $1.85.

You can calculate the growth rate with the formula:

Dividend Growth Rate = (Dividend received at end of 2020/Dividend received at end of 2016) ^ (1/n) - 1

2016 to 2020 is 4 years.

Dividend growth rate = (1.85 / 1.37)¹/⁴ - 1

= 0.07798518

= 7.80%