What is the expected annual growth rate of the dividend for ELO stock using the Dividend Discount Model?
The expected annual growth rate of the dividend for ELO stock using the Dividend Discount Model is 6.59%.
Understanding the Calculation
The Dividend Discount Model (DDM) is a widely used method to estimate the value of a stock by determining the present value of expected future dividends. In this case, we are calculating the expected annual growth rate of the dividend for ELO stock.
Formula:
Expected annual growth rate of dividend = (Annual dividend / Market value of stock) − Expected rate of return
Given:
- Annual dividend = $10.50
- Market value of stock = $159.57
- Expected rate of return = 12.34%
Calculation:
Expected annual growth rate of dividend = ($10.50 / $159.57) − 12.34%
Expected annual growth rate of dividend = 0.0659 or 6.59% (rounded to 2 decimal places)
Therefore, the expected annual growth rate of the dividend for ELO stock using the Dividend Discount Model is 6.59%. This calculation provides insight into the future growth potential of dividends for investors in ELO stock.