Here we have a $3 current amount that grows at 8 percent per year for five years. The future amount is thus:

The dividend will therefore increase by $1.41 over the coming five years.

If the dividend grows at a steady rate, then we have replaced the problem of forecasting an infinite number of future dividends with the problem of coming up with a single growth rate, a considerable simplification. In this case, if we take D0 to be the dividend just paid and g to be the constant growth rate, the value of a share of stock can be written as:

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