Question

Current Stock Price = $76.04 Forward Dividend & Yield 2.48( 3.45%) 1 year growth estimate= 3.6%

a) First calculate the expected holding period return (HPR) on Target Corporation’s stock (you can also choose any company you would like to do the analysis) based on its current price, its expected price, and its expected dividend. Please show calculations.

i) Get information for Target (enter TGT under quote search). From the Analyst Opinion Page, find the range for estimated target price for the next fiscal year.

ii) Collect information about today’s price and the dividend rate. What is the company’s expected dividend in dollars for the next fiscal year?

iii) Use thee inputs to calculate the range of Target’s HPR for the next year.

Answer 1

a)

Current Price = 76.04

growth estimate = 3.6

Expected Price = 76.04*1.0036 = 78.77

Dividend expected = 2.48

Holding period return (HPR) expected = {Dividend Income + (End of Period Value – Initial Value)} / Initial Value

Holding period return (HPR) expected = {2.48 + (78.77 - 76.04) } / 76.04 = 6.86%

i) Expected price by analyst for next year = 77.29

ii) Today Price = 75.77

Expected Price= 75.77*1.036 = 78.49

Dividend payout = 45.86%

EPS = 5.33

Dividend per share = 5.33 * 0.4586 = 2.44

Dividend for next year = 2.44 *1.036 = 2.53

iii) HPR = {2.53 + (78.49 - 75.77)} / 75.77 = 6.93%