Question

Calculate the annual dividend growth rate for the last 10 years. Based on the annual dividend growth rate for each company, will you forecast a constant or non-constant growth in dividends? Explain.

ETN Company

Date	Dividends
2/4/10	0.5
5/6/10	0.5
8/5/10	0.58
11/4/10	0.58
2/3/11	0.68
5/5/11	0.34
8/4/11	0.34
11/3/11	0.34
2/2/12	0.38
5/3/12	0.38
8/2/12	0.38
10/4/12	0.38
3/7/13	0.42
5/2/13	0.42
8/1/13	0.42
10/31/13	0.42
3/6/14	0.49
5/1/14	0.49
7/31/14	0.49
11/12/14	0.49
3/5/15	0.55
4/30/15	0.55
7/30/15	0.55
11/5/15	0.55
3/3/16	0.57
5/4/16	0.57
8/3/16	0.57
11/3/16	0.57
3/2/17	0.6
5/3/17	0.6
8/2/17	0.6
11/2/17	0.6
3/9/18	0.66
5/3/18	0.66
8/2/18	0.66
11/1/18	0.66

Answer 1

Fact of the question:
Annual Divident Growth rate is given from 2011 to 2018
Except first two years, growth is constantly linear

As the growth is constant from the year 2013 to 2018, we will use constant method of forecasting annual divident growth rate for the year 2019 and 2020:

Growth for the year 2019 calculated with below formula will be 0.7071 and for 2020, it will be 0.7528

CAGR=(BV/EV​)n1​−1

where:EV=Ending value
BV=Beginning value
n=Number of years​