Dixie South currently pays an annual dividend of $1.46 a share and plans on increasing that amount by 2.75 percent annually. Northern Culture currently pays an annual dividend of $1.42 a share and plans on increasing its dividend by 3.1 percent annually. Given this information, you know for certain that the stock of Northern Culture has a higher ________ than the stock of Dixie South.

Question

Quizplus · Accepted Answer

The capital gains yield of a stock is determined by the rate at which its dividends are expected to grow. Northern Culture has a higher dividend growth rate (3.1%) compared to Dixie South (2.75%), indicating a higher capital gains yield for Northern Culture.

Dixie South Currently Pays an Annual Dividend of $1