The annual dividends for a stock over the past four years have been $1.90, $2.10, $2.20, and $2.35, respectively. What is the arithmetic growth rate in dividends?

Question

Quizplus · Accepted Answer

The arithmetic growth rate is calculated by taking the difference between the final and initial values, dividing by the initial value, and then dividing by the number of periods. Here, the initial dividend is $1.90 and the final dividend is $2.35 over 3 periods (from year 1 to year 4). The growth rate = (($2.35 - $1.90) / $1.90) / 3 = 0.0737 or 7.37%.

The Annual Dividends for a Stock Over the Past Four