Siblings, Inc

Accounting Dec 18, 2020

Siblings, Inc., is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. The company has a dividend yield of 6.8 percent. What is the required return on the company's stock? Required return percentage = _____.

Expert Solution

The required return on the company's stock is 11.8%.

We can calculate this figure using the following formula:

Return on equity = dividend yield + dividend growth rate

Return on equity = = 0.068 + 0.05

Return on equity = 0.118 or 11.8%

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