Question

CDB stock is currently priced at $63. The company will pay a dividend of $4.81 next year and investors require a return of 11.1 percent on similar stocks. What is the dividend growth rate on this stock?

Answer 1

Ans 3.47%

P0 =	Price of Share
D1 =	Current Dividend
Ke =	Cost of Equity
g =	growth rate
P0 =	D1 / (Ke - g)
63 =	4.81 / (11.1%- g)
11.1% - g =	4.81 / 63
11.1% - g =	7.63%
g =	11.1% - 7.63%
g =	3.47%