The Koster Co.currently pays an annual dividend of $1.00 and plans on increasing that amount by 5% each year.The Keyser Co.currently pays an annual dividend of $1.00 and plans on increasing its dividend by 3% annually.Given this,it can be stated with certainty that the _____ of the Koster Co.stock is greater than the _____ of the Keyser Co.stock.

Question

Quizplus · Accepted Answer

The total return of a stock is influenced by both the dividend growth rate and the capital gains. Since Koster Co. has a higher dividend growth rate (5% compared to Keyser Co.'s 3%), it can be expected to have a higher total return, assuming other factors remain constant.