Question
1. Using the past dividend payout information between 2016 and 2020, compute the growth rate (g) for these companies. Your companies must have a complete
1. Using the past dividend payout information between 2016 and 2020, compute the growth rate (g) for these companies. Your companies must have a complete history of dividend payout during these periods. (40 points).
COMPANY A - Dividend Yield Summary
2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |
Dividends | 2.22 | 3.33 | 3.34 | 3.51 | 3.60 | 2.70 |
Average Price | 53.10 | 60.90 | 58.95 | 54.68 | 44.94 | 61.80 |
Yield | 4.18% | 5.47% | 5.67% | 6.42% | 8.01% | 4.37% |
The above Dividend, Average Price, and Yield values for 2021 are year-to-date.
COMPANY B - Dividend Yield Summary
2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |
Dividends | 1.93 | 1.64 | 1.80 | 2.15 | 2.05 | 1.20 |
Average Price | 12.66 | 16.74 | 19.46 | 21.51 | 17.89 | 28.28 |
Yield | 15.25% | 9.80% | 9.25% | 10.00% | 11.46% | 4.24% |
The above Dividend, Average Price, and Yield values for 2021 are year-to-date.
2. First, lets assume that the required return (R) is 10% for all these companies. Using R, dividend information, and growth rate (g) from question 1, compute the stock prices of these companies. Second, lets assume that the required return (R) is 20% for all these companies. Using R, dividend information, and growth rate (g) from question 1, compute the stock prices of these companies (40 points).
3. Compare your estimated stock prices with actual stock prices as of January 4, 2021. Then tell me whether each stock is undervalued or fairly-valued or overvalued based on your estimation. Whats your decision if you hold these stocks? Whats your decision if you dont hold these stocks? (20 points).
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