The Sorka Corp. has paid annual dividends of $0.60, $0.63, $0.65, $0.68 and $0.72, respectively, over the past five years. What is the dividend growth rate?
A) 4.7%
B) 5.2%
C) 5.4%
D) 5.9%

Question

Quizplus · Accepted Answer

The dividend growth rate can be calculated using the formula for the compound annual growth rate (CAGR), which is [(Ending Value/Beginning Value)^(1/Number of Periods)] - 1. Applying this formula to the given dividends over the five years, we use the first dividend of $0.60 and the last dividend of $0.72. The calculation is [(0.72/0.60)^(1/4)] - 1, which equals approximately 0.047 or 4.7%.