The
next dividend payment by Wyatt, Inc., will be $2.50 per share. The
dividends are anticipated to maintain a growth rate of 5.75 percent,
forever. Assume the stock currently sells for $48.60 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).)
|
| 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).)
|
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 = $2.50 / $48.60 |
| Dividend yield = .0514, or 5.14% |
2:
The capital gains yield, or percentage increase in the stock price, is the same as the dividend growth rate, so:
|
| Capital gains yield = 5.75% |
