You're analyzing the stock of a certain company. The most recent dividend paid was $7 dollars per share. The company's discount rate is 7%, and the firm is expected to grow at 3% per year forever. What is the dividend yield of this stock?
Computation of stock price = [Dividend * (1 + growth rate)] / (discount rate-growth rate)
Stock price = $7*(1.03) / (0.07-0.03)
Stock price = $180.25
Dividend yield = Annual dividend / Stock price
Dividend yield = $7 / $180.25
Dividend yield = 0.0388
or Dividend yield = 3.88%
You're analyzing the stock of a certain company. The most recent dividend paid was $7 dollars...
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