You buy a common stock that currently has a dividend yield of 7% a year. If...
You buy a common stock that currently has a dividend yield of 7% a year. If you assume that this company will grow at a constant rate in the future, which of the following is correct?
A. The dividend yield will grow in the future at the same rate as the dividends.
B. The dividend yield will be lower each year in the future, but the price will appreciate in the future.
C. There is not enough information to determine an answer.
D. The dividend yield will remain constant in the future.
Homework Answers
Dividend yield will be dependes on the price of the stock. If the price of the stock is decreased dividend yield will be increased and if price of stock increased dividend yield will be decreased. If dividend payment is increased price of the stock will be appreciated and dividend yield will be decreased.
Therefore, Option B is correct.
The dividend yield will be lower each year in the future, but the price will appreciate in the future.
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