Logistics just paid an annual dividend of $2.20 and announced that all future dividends would be $2.25 a share indefinitely.What is your required rate of return if you are willing to pay $15.25 a share for this stock?

Question

Quizplus · Accepted Answer

The required rate of return is the dividend yield, which is the annual dividend divided by the current stock price. In this case, the annual dividend is $2.25 and the current stock price is $15.25, so the dividend yield is $2.25/$15.25 = 14.75%.

Logistics Just Paid an Annual Dividend of $2