The current dividend yield on Claytons Metal common stock is 3.2 percent. The co

Question

The current dividend yield on Claytons Metal common stock is 3.2 percent. The company just paid $1.48 annual dividend and announced plans to pay $1.54 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on this stock? The current dividend yield on Claytons Metal common stock is 3.2 percent. The company just paid $1.48 annual dividend and announced plans to pay $1.54 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on this stock?

Explanation / Answer

The current dividend yield on Claytons Metal common stock is 3.2 percent. The company just paid $1.48 annual dividend and announced plans to pay $1.54 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on this stock?

P0= 1.54 /0.032=48.125

P0= 1.54-1.48 /1.48=0.04

48.125=1.54 /R -0.04

48.125 R

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