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

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

Requirement 1:

What is the dividend yield? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Dividend yield

%

Requirement 2:

What is the expected capital gains yield? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Capital gains yield

%

 
Explanation:

1:

The dividend yield is the dividend next year divided by the current price, so the dividend yield is:

Dividend yield = D1 / P0

Dividend yield = $2.65 / $48.90

Dividend yield = .0542, or 5.42%

2:

The capital gains yield, or percentage increase in the stock price, is the same as the dividend growth rate, so:

Capital gains yield = 6.5%