Would you classify the Foxboro stock as a growth or an income stock? Explain

Question: Foxboro Company expects to pay a $2.34 per share cash dividend this year on its common stock. The current market value of Foxboro stock is $32.50 per share. Compute the expected dividend yield on the Foxboro stock. Would you classify the Foxboro stock as a growth or an income stock? Explain

Expert Solution

Step 1: Definition of dividend yield

Dividend yield specifies the annual amount of cash dividends distributed to common shares relative to their market value. It is the rate at which the dividend is provided to the shareholders.

Step-2 Formula for Dividend Yield

The dividend yield is calculated by dividing the annual dividend Per-share by the market value per share.

Step 3: Classification

Foxboro has a dividend yield of 7.2%, which implies it is an income stock for which dividends are important in assessing its value.

The dividend yield of the company is 7.2%.

Sahil Dangi answered 2 years ago

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