posted by Robert on .
If a company pays $4.90 dividend at the end of the year, and the stock price is $70, and the growth rate is 6% can you tell me what the required rate of return would be using the dividend yield and growth rate (capital gains)?
The REQUIRED rate is an arbitrary quantity, and depends upon the long term track record and business prospects of the company, as well as current bond market yields. In a word, it depends upon investor sentiment.
You have quoted ACTUAL stock performance data. It indicates that the current total return (dividends plus capital gain) is 6% + 4.90/70 = 13%