Question

You purchased GARP stock one year ago at a price of $63.61 per share.Today, you sold your stock and earned a total return of 18.23 percent. If the stock paid dividens of $ 2.36 per share over the year. What was the capital gains yield on your investment?

Answer 1

Sol :

Purchase price per share = $63.61

Total return earned = 18.23%

Dividend per share received = $2.36

To determine capital gain yield on the investment is as follows,

Dividend yield = Dividend per share / Purchase price per share

Dividend yield = 2.36 / 63.61 = 0.0371 or 3.71%

Capital gain yield on the investment = Total return earned - Dividend yield

Capital gain yield on the investment = 18.23% - 3.71% = 14.52%

Therefore capital gain yield on the investment will be 14.52%