You are considering buying the stock of two very similar companies. Both companies are expected to earn $3 per share this year. However, Company D is expected to pay all of its earnings out as dividends, while Company G is expected to pay out only one-third of its earnings, or $1. D's stock price is $20. . Both companies are equally risky. What is the best estimate of Company G's growth rate?© BrainMass Inc. brainmass.com September 23, 2018, 2:36 pm ad1c9bdddf - https://brainmass.com/economics/finance/stock-valuation-90172
The total expected return for D is Kd = D/Po + g = 15% + 0% = 15%. The total expected return for G will ...
Comparison of stocks from similar companies but with different earnings payouts.