The Airasiang Berhad is expected to pay a dividend of RM1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6 percent per year in the future. The company’s beta is 1.15, the market risk premium is 5.5 percent and the risk free rate is 4 percent. What is the Airasiang Berhad’s current stock price?
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
The Airasiang Berhad is expected to pay a dividend of RM1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6 percent per year in the future. The company’s beta is 1.15, the market risk premium is 5.5 percent and the risk free rate is 4 percent. What is the Airasiang Berhad’s current stock price?
If the dividend already paid at RM1.75, the growth which is constant at 3.6 percent, and the price of the stock is RM32.00, what is the stock’s expected total return for coming year?
Makan Incorporations has a stock with a required rate of return of 10.25 percent, and it sells for RM57.50 per share. The dividend is expected to grow at a constant rate of 6 percent per year. What is the expected year end dividend for this stock?
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