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Value of stock in future?
A stock paying $3 in annual dividends sells now for $65 and has an expected return of 12%. What might investors expect to pay for the stock one year from now?
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- Don GLv 77 years ago
R = Next Div / Price + G, so 12% = 3 / 65 + G, so G = 7.4
Price in one year = Price today + R - Next Div , or 65 x 1.12 = 72.80 - 3.00 = 69.80
(i.e. 69.80 / 65.00 = 1.074%)
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