Question

The next dividend payment by Mosby, Inc., will be $2.65 per share. The dividends are anticipated to maintain a 6.50 percent growth rate, forever. Assume the stock currently sells for $48.90 per share. |

Requirement 1: |

What is the dividend yield? |

Dividend yield | % |

Requirement 2: |

What is the expected capital gains yield? |

Capital gains yield | % |

Answer #1

Dividend yield= Dividend/Share price

= $2.65/ $48.90= 0.0542*100= **5.42%.**

The capital gains yield is the same as dividend growth rate which is 6.50%.

Therefore, the capital gains yield is
**6.50%.**

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