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New Orleans Shipping. If the share price of Emaline, a New Orleans-based shipping firm, rises from $12 to $15 over a one-year period, what is the rate of return to the shareholder given each of the following: a. The company paid no dividends. b. The company paid a dividend of $1 per share. c. The company paid the dividend, and the total return to the shareholder is separated into the dividend yield and the capital gain.

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Answer:

a. The company paid no dividends.

  • = ($15 / $12) - 1 = 0.25 = 25%

b. The company paid a dividend of $1 per share.

  • = ($16 / $12) - 1 = 0.333 = 33.3%

c. The company paid the dividend, and the total return to the shareholder is separated into the dividend yield and the capital gain.

  • dividend yield = $1 / $12 = 0.083 = 8.3%
  • capital gain = $3 / $12 = 0.25 = 25%

Explanation:

initial investment = $12

current market price = $15

gain = $3 if no dividend paid, and $4 if dividend paid

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