Increasing dividends may not always increase the stock price

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Reference no: EM13913338

Which of the following statements is true?

a. Increasing dividends may not always increase the stock price, because less earnings may be invested in the firm and that impedes growth.

b. Increasing dividends will always decrease the stock price, because the firm is depleting internal funding resources.

c. Increasing dividends will always increase the stock price

Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $2.45 at the end of the year. Its dividend is expected to grow at a constant rate of 6.50% per year. If Walter's stock currently trades at $27.00 per share, what is the expected rate of return?

a. 11.67%

b. 6.59%

c. 15.57%

d. 7.18%

Walter's dividend is expected to grow at a constant growth rate of 6.50% per year. What do you expect to happen to Walter's expected divident yield in the future?

a. It will increase

b. It will stay the same

c. It will decrease

Reference no: EM13913338

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