Problem:
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.
Additional Information:
This question is basically belongs to Finance as well as it explains about computing the growth rate of a company with the growth rate of dividends. The solution has all the calculations.