Winston Co. has a dividend yield of 5.4 percent and a total return for the year of 4.8 percent. Which one of the following must be true?
A) The dividend must be constant.
B) The stock has a negative capital gains yield.
C) The capital gains yield must be zero.
D) The required rate of return for this stock increased over the year.
E) The firm is experiencing supernormal growth.

Question

Quizplus · Accepted Answer

The total return is the sum of the dividend yield and the capital gains yield. Since the total return (4.8%) is less than the dividend yield (5.4%), the capital gains yield must be negative.