Estimate the Growth rate of stock
Data
stock price = 53
rate of return= 12%
expected dividend = 3.15
Formula :
Expected return = (dividend paid + capital gain (growth)) / price of stock
Expected Growth = (price of stock x expected return) - dividend paid
Expected growth = (53 x 12%) - 3.15
Expected growth = 3.21
Growth rate = Expected growth / stock price * 100
Growth rate = 3.21 / 53 * 100
Growth rate = 6.05 % or 6 %
This can be solved through this formula as well
Formula
Dividend Growth rate = Discount rate - (dividend paid / stock price)
Dividend growth rate = 12% - ( 3.15 / 53)
Dividend growth rate = 6%