You bought a stock of XYZ one year ago for $50 per share and sold it today for $55 per share. It paid a $1 per share dividend today.What was your realized return?How much of the return came from dividend yield and how much came from capital gain?       Assuming that the stock fell $5 to $45 instead.Is your capital gain different? Why or why not?Is your dividend yield different? Why or why not?

Question
Asked Nov 28, 2019
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You bought a stock of XYZ one year ago for $50 per share and sold it today for $55 per share. It paid a $1 per share dividend today.

  1. What was your realized return?
  2. How much of the return came from dividend yield and how much came from capital gain?

       Assuming that the stock fell $5 to $45 instead.

  1. Is your capital gain different? Why or why not?
  2. Is your dividend yield different? Why or why not?
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Expert Answer

Step 1

1.

The realized return is 12%.

 Computation of realized return:

 

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S1+(S55-S50) Realized retun $50 =12%

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Step 2

2.

 The return from dividend yield and capital gain are 2% and 10%.

 Computation of return from dividend yield and capital gain:

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S1 Return from divi dend yield S50 =2% ($55-$50) Return from capital gain S50 = 10%

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Step 3

If the stock price falls to $45:

1.

Computation of return from capital gain:

Yes, there is a difference in return f...

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($45-S50 Return from capital gain $50 -10%

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