Estimate the annual growth rate of dividends

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Reference no: EM131868068

Today is January 2, 2017. Our goal is to use the “constant growth dividend discount model” to analyze the U.S. equity market (SPY). Download the history of prices and dividend payments for this ETF from Yahoo! Finance starting in 2005.

a. What is the most recent (December 30, 2016) share price and how many dollars of dividends were paid in 2016?

b. Estimate the annual growth rate of dividends. (Graph, regression, CAGR, fundamentals, you decide). Note there may be a seasonal in the historical dividends that you will need to handle.

c. Based on the 2016 dividend and your estimate of future growth, how many dollars of dividends will be paid in the next 12 months and what dividend yield does this imply (use the December 30, 2016).

d. What expected return (r or cost of capital) is implied by the price, the growth rate of dividends, and trailing dividend payment?

Reference no: EM131868068

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