Question

XES FILE HOME Calculating dividend yield and capital gains yield - Excel PAGE LAYOUT FORMULAS DATA REVIEW VIEW INSERT Sign In % Arial - - 12 - A A Paste B IU B A Editing Alignment Number Conditional Format as Cell Formatting Table Styles Styles Cells - Clipboard Font D15 AB DE F G H The next dividend payment by Halestorm, Inc., will be $2.04 per share. The dividends are anticipated to maintain a growth rate of 4.5 percent forever. The stock currently sells for $37 per share. What is the dividend yield? What is the expected capital gains yield? $ Next year's dividend Dividend growth rate Stock price 2.04 4.5% 37.00 Complete the following analysis. Do not hard code values in your calculations. Dividend yield 5.51% Capital gains yield

Answer 1

Dividend yield = D1 / P0

Dividend yield = $2.04 / $37

Dividend yield = 0.0551, or 5.51%

The capital gains yield, or percentage increase in the stock price, is thesame as the dividend growth rate, so:

Capital gains yield = 4.5%