Calculation of Growth Rate Based on Dividend Payout

Question

ABC Co. has the following dividend payment history:

Year

Dividend

2003

$1.00

2004

1.15

2005

1.25

2006

1.35

2007

1.45

a. How many periods of growth are there in the information given?

b. What is the compound growth rate of dividends?

c. Calculate the year-to-year growth rates in dividends.

d. What is the average year-to-year dividend growth rate?

e. Assume a retention ratio of 0.45 and a historical return on equity (ROE) of 0.18. Using these two additional pieces of information, calculate an alternative estimate of dividend growth rate, g.

 

Summary

The question belongs to Finance and it discusses about calculating the growth rate of a company with the growth rate of dividends. The solution has all the calculations.

Total Word Count 35


 

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