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Suppose you know that a company's stock currently sells for $72 per share and the required return on the stock is 11.5 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?

Respuesta :

The dividend yield is the annual dividend payment divided by the stock's current market price. If the total return is evenly divided between the capital gains yield and the dividend yield, and the required return is 11.5 percent, then the dividend yield is half of that, or 5.75 percent.

Dividend Yield = Required Return / 2

Dividend Yield = 11.5% / 2 = 5.75%

Now, you can use the dividend yield and the stock price to find the current dividend per share:

Dividend per Share = Dividend Yield * Stock Price

Dividend per Share = 5.75% * $72

Dividend per Share = $4.14

So, the current dividend per share is $4.14.

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