A stock currently sells for 49 The dividend yield is 38 perc

A stock currently sells for $49. The dividend yield is 3.8 percent and the dividend growth rate is 5.1 percent. What is the amount of the dividend that was just paid?

$1.86

$1.55

$1.68

$1.77

$1.68

Solution

Dividend yield=Annual Dividend next year/Current price

Annual Dividend next year=(49*3.8%)=$1.862

Hene dividend just paid=Annual Dividend next year*Present value of discounting factor(5.1%,time period)

=$1.862/1.051

which is equal to

=$1.77(Approx).