When using the dividend discount model, assuming that growth (g) will remain constant, under which of the following circumstances will the dividend yield be equal to the required return on a common stock (rs)?

Question

Quizplus · Accepted Answer

When g=0, the dividend discount model simplifies to the constant dividend model, where the dividend is constant and the stock's value is calculated as D/rs, where D is the constant dividend and rs is the required return. In this case, the dividend yield (D/P) will be equal to the required return (rs/P).

When Using the Dividend Discount Model, Assuming That Growth (G)