Suppose a stock had an initial price of $70 per share, paid a dividend of $2.30

Question

Suppose a stock had an initial price of $70 per share, paid a dividend of $2.30 per share during the year, and had an ending share price of $55.

Compute the percentage total return. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What was the dividend yield and the capital gains yield? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Suppose a stock had an initial price of $70 per share, paid a dividend of $2.30 per share during the year, and had an ending share price of $55.

Explanation / Answer

Percentage return = (Dividends paid at end of period + Change in market value over period) / Beginning market value

Percentage total return (R) = [$2.30 + ($55 - $70)]/$70 = - 18.14 %

Dividend yield = Annual Dividend payout / current stock price

Dividend yield = $2.30/$70 = 3.29 %

Capital gains yield = P1 – P0 / P0

P0 = Initial stock price P1 = Stock price after 1st period

Capital gains yield = ($55 - 70)/$70 = -21.43%

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