Question

A stock is priced at $38.24 a share and has a market rate of return of 9.65 percent. What is the dividend growth rate if the company plans to pay an annual dividend of $.48 a share next year

Answer 1

Answer:

8.4%

Explanation:

The stock price is $38.24

The market rate of return is 9.65%

The annual dividend is $0.48

Therefore the dividend growth rate of the company can be calculated as follows

= 9.65/100-(0.48/38.24)×100

= 0.0965 -0.01255×100

= 0.08395×100

= 8.4%

Hence the dividend growth rate is 8.4%