Asked by Mariia Dublevska on Jul 01, 2024
Verified
As illustrated using the dividend growth model, the total return on a share of common stock is comprised of a ________________.
A) Capital gains yield and a dividend growth rate.
B) Capital gains growth rate and a dividend growth rate.
C) Dividend payout ratio and a required rate of return.
D) Dividend yield and the present dividend.
E) Dividend yield and a capital gains yield.
Dividend Growth Model
A model for valuing a stock by assuming constant, usually non-zero growth in dividends per share.
Capital Gains Yield
The increase in the price of an investment, calculated as the percentage difference between the current price and the purchase price.
Total Return
The overall financial gain or loss on an investment, accounting for both capital gains, dividends, and interest income.
- Understand the dividend growth model and its application in stock valuation.
Verified Answer
AL
Aaliyah Leonardo5 days ago
Final Answer :
E
Explanation :
The total return on a share of common stock, as illustrated by the dividend growth model, is comprised of two main components: the dividend yield (which is the annual dividend payment divided by the price of the stock) and the capital gains yield (which represents the rate at which the value of the investment grows).
Learning Objectives
- Understand the dividend growth model and its application in stock valuation.