Josh purchased 100 shares of XOM at the beginning of 2016. He received dividends per share of $1.37 (2016), $1.55 (2017), $1.66 (2018), $1.74 (2019), $1.85 (2020). At the end of 2020, just after receiving the last dividend, he sold the stock for $84.76. At what rate did the dividends grow from the end of 2016 to the end of 2020? Assume that all dividends were received at the end of the year.
A) 7.8%
B) 6.2%
C) 13.1%
D) 35%

Question

Quizplus · Accepted Answer

The dividend growth rate can be calculated using the formula:Dividend Growth Rate = (Ending Dividend / Beginning Dividend)^(1 / Number of Years) - 1In this case, the beginning dividend is $1.37 and the ending dividend is $1.85. The number of years is 5.Dividend Growth Rate = ($1.85 / $1.37)^(1 / 5) - 1 = 7.8%Therefore, the dividend growth rate from the end of 2016 to the end of 2020 was 7.8%.

Josh Purchased 100 Shares of XOM at the Beginning of 2016