Question

The next dividend payment by Savitz, Inc., will be $2.34 per share. The dividends are anticipated to maintain a growth rate of 4.5 percent forever. The stock currently sells for $37 per share. a. What is the dividend yield?

Answer 1

Answer:

Explanation:

Market value of stock MV=$37

Dividend D1=$2.34

Growth rate g=4.5%

Dividend yield Ke=?

Formula;

MV=D1/(Ke-g)

37=2.34/(Ke-.045)

37Ke-1.665=2.34

Ke=(2.34+1.665)/37

Ke=10.8%