You hold 100 shares of Harrington Motors, a dividend-paying stock, that generate
ID: 2769159 • Letter: Y
Question
You hold 100 shares of Harrington Motors, a dividend-paying stock, that generated a total return for 2012 of -5.05 percent. Which one of the following must be true?
Harrington is experiencing supernormal growth.
Harrington's dividend must be constant.
Harrington's dividend yield must be zero.
Your required rate of return for this stock increased over the year.
Harrington stock has a negative capital gains yield.
Harrington is experiencing supernormal growth.
Harrington's dividend must be constant.
Harrington's dividend yield must be zero.
Your required rate of return for this stock increased over the year.
Harrington stock has a negative capital gains yield.
Explanation / Answer
Total return = Dividend yield+capital gains yield
Dividend can never be less than ZERO. It could hardly ZERO but not less than it. Capital gains yield can be negative, because it depends on the share prices.
Hence, correct option is Harrington stock has a negative capital gains yield.
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