Consider four different stocks, all of which have a required return of 18.75 percent and a
most recent dividend of $3.20 per share. Stocks W, X, and Y are expected to maintain
constant growth rates in dividends for the foreseeable future of 10 percent, 0 percent,
and -5 percent per year, respectively. Stock Z is a growth stock that will
increase its
dividend by 20.75 percent for the next two years and then maintain a constant
12
percent growth rate, thereafter. (Hint: Z is like the last stock on the Stock Problems
video.)
a. What is the dividend yield for each of these four stocks? (Do not round intermediate
calculations and enter your answers as a percent rounded to 2 decimal places,
e.g., 32.16.)
b. What is the expected capital gains yield for each of these four stocks? (A negative
answer should be indicated by a minus sign. Leave no cells blank - be certain
to
enter "O" wherever required. Do not round intermediate calculations and enter
your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
a. Stock W dividend yield %
Stock X dividend yield
Stock Y dividend yield
%
%