Dividend Yield and Expected Capital Gains Yield Calculation

What is the dividend yield of IM, Incorporated?

What is the expected capital gains yield of IM, Incorporated?

Dividend Yield:

Expected Capital Gains Yield:

Dividend payment by IM, Incorporated: $1.87 per share. Anticipated growth rate: 4.3% per year. Stock price: $37 per share.

Dividend Yield: The dividend yield is the annual dividend payment of the company divided by the current stock price.

The formula for calculating the dividend yield is: DY = D / P

Given D = $1.87 per share and P = $37 per share, the dividend yield is calculated as 5.05%.

Capital Gains Yield: Capital gains yield is the percentage of the increase in the stock price over a certain period of time.

The formula for calculating the capital gains yield is: CGY = (P1 – P0) / P0 × 100%

The expected stock price formula is: P1 = D1 / (r – g)

Assuming a required rate of return of 12%, the expected stock price is $43.40 per share.

Substitute the values to calculate the capital gains yield: CGY = ($43.40 – $37) / $37 × 100%

The expected capital gains yield of IM, Incorporated is 17.84%.