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 | ||||||||||

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