Question

Bait 'n Tackle started paying dividends 4 years ago. The annual dividends thus far have been $0.41, $0.56, $0.55, and $0.61, respectively. What is the percentage arithmetic average dividend growth rate? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Bait 'n Tackle started Dividends 4 years ago. Dividends of the past 4 years are:-

D1 = $0.41

D2 = $0.56

D3 = $0.55

D4 = $0.61

Growth rate of Dividend from Year 1 to Year 2 = (D2 - D1)/D1

=($0.56 - $0.41)/$0.41

= 36.585366%

Growth rate of Dividend from Year 2 to Year 3 = (D3 - D2)/D2

=($0.55 - $0.56)/$0.56

= -1.785714%

Growth rate of Dividend from Year 3 to Year 4 = (D4 - D3)/D3

=($0.61 - $0.55)/$0.55

= 10.909091%

Now, Calculating the % Arithmetic Avearge Dividend Growth rate:-

= (36.585366% - 1.785714% + 10.909091%)/3

= 15.24%

So,   the percentage arithmetic average dividend growth rate is 15.24%