Question

Amscot Financial Services' common stock offers an expected total return of 14.56 percent. The last annual dividend was $2.27 a share. Dividends increase at a constant 2.1 percent per year. What is the dividend yield?

Answer 1

Dividend yield is 12.46%

Working:

Step-1:Calculation of Price of dividend
	Price of Dividend		=	D0*(1+g)/(Ke-g)			Where,
			=	2.27*(1+0.021)/(0.1456-0.021)			D0	Last dividend		$       2.27
			=	$    18.60			g	Growth rate		2.10%
							Ke	Expected Return		14.56%
Step-2:Calculation of dividend yield
	Dividend Yield		=	Annual dividend/Current Price
			=	$       2.32	/	$    18.60
			=	12.46%
	Working;
	Annual dividend		=	D0*(1+g)
			=	2.27*(1+0.021)
			=	$       2.32