CFA Level I · CFA Level I Exam · Relative Value Equity Valuation Approaches
A stock trades at €60.00. Its last four quarterly dividends were €0.30, €0.30, €0.35 and €0.35 per share, and the next four quarterly dividends are expected to be €0.40 each. The trailing dividend yield is closest to:
The trailing dividend yield is about 2.17%. Trailing dividends over the past four quarters total €1.30 per share, and dividing by the €60.00 price gives 2.17%. The 2.67% figure is the forward yield based on expected dividends.
- A1.08%
- B2.17%Correct
- C2.67%
Explanation
Trailing dividends = 0.30+0.30+0.35+0.35 = €1.30. Yield = 1.30/60 = 2.17%. The forward yield would be 1.60/60 = 2.67%, which uses expected dividends and is wrong for a trailing measure. 1.08% comes from using only two quarters.
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