The P/E ratio of the S&P 500 index is 20. The dividend payout ratio of the...
The P/E ratio of the S&P 500 index is 20. The dividend payout ratio of the S&P 500 index is 30%. The expected annual growth rate of dividends for the portfolio of S&P 500 stocks is 2%. What is your estimated expected return from investing in the S&P 500?
Homework Answers
P/E ratio = 20/1
dividend payout ratio = 30%
growth = 2%
RRR or expected return =(Expected dividend payment/Share price) +Forecasted dividend growth rate
= (30/20) + 0.02
= 1.52 %
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