Question

Find the average annual growth rate of the dividends for each firm listed in the following table.

Dividend Payment per Year

Firm 2006 2007 2008 2009 2010 2011

Loewen ​$1.03 ​$1.05 ​$1.10 ​$1.20 ​ $1.27 ​ $1.40

Morse ​ $1.12 ​ $0.95 ​$0.80 ​ $1.30 ​ $1.20 ​ $1.45

Huddleston ​$1.00 ​ $2.00 ​ $3.50 ​ $3.90 ​ $4.00 ​$4.50

Meyer ​ $2.25 ​ $2.00 ​ $2.10 ​ $2.74 ​ $2.85 ​ $2.90

What is the average annual growth rate of the dividends paid by​ Loewen?

Answer 1

The average annual growth rate (AAGR) is the average increase in the value of an dividend over the period of a year.
AAGR = [Growth rate in 2007 + Growth rate in 2008 + Growth rate in 2009 + Growth rate in 2010 + Growth rate in 2011] / Number of years
Calculation of average annual growth rate of the dividends paid by​ Loewen
Growth rate in 2007 = [($1.05 / $1.03) -1] =	1.94%
Growth rate in 2008 = [($1.10 / $1.05) -1] =	4.76%
Growth rate in 2009 = [($1.20 / $1.10) -1] =	9.09%
Growth rate in 2010 = [($1.27 / $1.20) -1] =	5.83%
Growth rate in 2011 = [($1.40 / $1.27) -1] =	10.24%
Total Growth rates	31.86%
/ Number of Years	5
Average annual growth rate of dividends paid by Loewen	6.37%