Dividend Yield and Expected Capital Gains Yield Calculation
What is the dividend yield of IM, Incorporated?
What is the expected capital gains yield of IM, Incorporated?
Dividend Yield:
Expected Capital Gains Yield:
Dividend payment by IM, Incorporated: $1.87 per share. Anticipated growth rate: 4.3% per year. Stock price: $37 per share.
Dividend Yield: The dividend yield is the annual dividend payment of the company divided by the current stock price.
The formula for calculating the dividend yield is: DY = D / P
Given D = $1.87 per share and P = $37 per share, the dividend yield is calculated as 5.05%.
Capital Gains Yield: Capital gains yield is the percentage of the increase in the stock price over a certain period of time.
The formula for calculating the capital gains yield is: CGY = (P1 – P0) / P0 × 100%
The expected stock price formula is: P1 = D1 / (r – g)
Assuming a required rate of return of 12%, the expected stock price is $43.40 per share.
Substitute the values to calculate the capital gains yield: CGY = ($43.40 – $37) / $37 × 100%
The expected capital gains yield of IM, Incorporated is 17.84%.