the cost of common stock is usually greater than the simple dividend yield because?
Your question doesn't make any sense as you've stated it.
Average common stocks range in price from $10 to $100.
Yet dividend yields are quoted in percentages between 0.9% to 6.0%. In dollar amounts the annual dividends per share are between $1.00 and $6.00.
The cost of common stock is usually greater than the simple dividend yield because investors consider two main factors when valuing stocks: dividend yield and capital gains potential.
The dividend yield is calculated by dividing the annual dividend payment by the stock price. It represents the percentage return an investor receives from holding the stock based on the dividend payment alone.
However, the cost of common stock takes into account not only the dividend yield but also the capital gains potential. Capital gains refer to the increase in a stock's price over time. Investors anticipate that the stock price will appreciate, allowing them to profit from selling the stock at a higher price in the future.
Hence, the cost of common stock is usually higher than the simple dividend yield because it reflects the overall expected return from both dividend payments and potential capital gains. Investors are willing to pay a premium to own a stock that has the potential for future appreciation.