Given the current financial information for both Microsoft and Coca Cola, how do calculate the expected dividend yield of Microsoft(MSFT) and Coca Cola(KO.
The growth or capital gains yield?
The total expected return for Microsoft and Coca Cola?
I'm not quite sure what numbers to plug into my calculations. Please help if possible.
Let's start with the expected dividend yield of MSFT. It currently is trading around $30 a share and it's paid $0.43 year in dividends. Dividing 0.43 by 30 we get 0.0143 or about 1.4% dividend yield.
The growth of a company is usually measured by its yearly or quarterly earnings per share.
The total expected return of a stock is the amount the stock price increases (or decreases?) plus the dividends paid to the stock holders.
You can find lots of information at online sites such as Yahoo Finance or Google Finance. Your library may carry the weekly publication Value Line which offers one-page summaries of many stocks. These are updated every three months.
To calculate the expected dividend yield for Microsoft (MSFT) and Coca Cola (KO), you would need the following financial information:
1. Dividends Per Share (DPS): This refers to the total amount of cash dividends paid by a company divided by the number of outstanding shares. You can find this information on the respective companies' financial statements or by searching financial websites.
2. Stock Price: You need the current stock price for MSFT and KO. This can be found on financial websites or through stock market data providers.
Once you have the DPS and stock price for both companies, you can use the following formula to calculate the dividend yield:
Dividend Yield = (DPS / Stock Price) * 100%
For example, if MSFT has a DPS of $2.50 and its stock price is $200, the dividend yield would be:
(2.50 / 200) * 100% = 1.25%
Repeat this calculation using the financial information for Coca Cola to determine its dividend yield.
Moving on to the growth or capital gains yield:
Growth or Capital Gains Yield = (Dividend Growth Rate + Earnings Growth Rate) * 100%
To calculate this, you need the Dividend Growth Rate and the Earnings Growth Rate for each company.
The Dividend Growth Rate can be calculated using the following formula:
Dividend Growth Rate = (Current DPS - Previous DPS) / Previous DPS * 100%
You can find the current DPS in the most recent financial statements and compare it to the previous DPS (usually the DPS from the previous year) to determine the growth rate.
The Earnings Growth Rate can be calculated using the following formula:
Earnings Growth Rate = (Current Earnings Per Share - Previous Earnings Per Share) / Previous Earnings Per Share * 100%
Again, you can find the current and previous Earnings Per Share in the financial statements to determine the growth rate.
Once you have the Dividend Growth Rate and the Earnings Growth Rate for each company, plug them into the formula mentioned above to calculate the growth or capital gains yield.
Lastly, to calculate the total expected return for Microsoft and Coca Cola, you would sum up the dividend yield and the growth or capital gains yield:
Total Expected Return = Dividend Yield + Growth or Capital Gains Yield
None of these calculations require data such as market trends or company-specific forecasts, so you can use the most recent financial information available for both companies.