In: Finance
Suppose a stock had an initial price of $85 per share, paid a
dividend of $1.50 per share during the year, and had an ending
share price of $99.
Compute the percentage total return. (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
Percentage total return
%
What was the dividend yield? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
Dividend yield
%
What was the capital gains yield?
Solution:
Initial stock price = $85 (per share)
Dividend paid = $1.5 (per share)
Share ending price = $99 (per share)
Stock rise = $99-85 =$14
Profit earned = stock rise + dividend yield = 14+1.5 =$15.5
(i) Percentage total return % = Total profit earned / Amount invested
= 15.5 / 85
= 18.24%
(ii) Dividend yield % = Dividend earned / Stock price
= 1.5 / 85
= 1.76%
(iii) Capital gains yield % = Stock rise / Initial stock price
= 14 / 85
= 16.47%