Question

Southern Markets recently paid an annual dividend of $2.62 on its common stock. This dividend increases at an average rate of 3.8 percent per year. The stock is currently selling for $28.12 a share. What is the dividend yield

Answer 1

Dividend yield = 9.67%

Step-by-step explanation:

Dividend growth rate = Average rate of increase in dividend = 3,8%

Next annual dividend = Annual dividend just paid * (100% + Dividend growth rate) = $2.62 * (100% + 3.8%) = $2.71956

Dividend yield = Next annual dividend / Current share selling price = $2.71956 / $28.12 = 0.0967, or 9.67%