I'm trying to figure out the annual dividend growth of a company in 30 years using the current annual dividend rate, and the 5 year growth rate.
The formula is A= P(1+r)^t
The current dividend Is $1.92 and the Five year dividend is $2.3
So I took 1.92(1 + .023)^30 and got 3.79, or 3.8
Is this correct?
Thanks
-MC
Hey MC:
if the current dividend is 1.92, and in five years it will be 2.3, the rate of growth is 1+i
2.3=1.9(growthrate)^5
take logs of each side:
log 2.3=log1.9 + 5log(growthrate)
log(2.3/1.9)=5log(GR)
log GR= 0.016594847
GR=10^above== 1.03895048
I hope I understand what you were looking for here.
Thank you very much
-MC
To determine the annual dividend growth of a company in 30 years using the current annual dividend rate and the 5-year growth rate, you would indeed use the formula A = P(1 + r)^t.
Here's the breakdown of the formula variables:
- A represents the desired annual dividend after the given time period (30 years in this case).
- P is the current annual dividend rate, which is $1.92.
- r is the growth rate per year, as a decimal. In this case, the 5-year growth rate is given as 2.3, so you would divide it by 100 to convert it to a decimal: 0.023.
- t is the number of years or time period. You are looking for the annual dividend growth after 30 years.
Using the formula A = P(1 + r)^t:
A = 1.92(1 + 0.023)^30
When you calculate this expression, you get approximately 3.79, or 3.8 as you rounded it. So, based on the given information and calculations, the estimated annual dividend amount after 30 years would be $3.79 or $3.80.
So yes, your calculation is correct.