Sime Natural Cosmetics Ltd has a dividend yield of 2 percent based on the current dividend and

Question:

Sime Natural Cosmetics Ltd has a dividend yield of 2 percent based on the current dividend and a mature phase dividend growth rate of 5 percent per year. The current dividend growth rate is 10 percent per year, but the growth rate is expected to decline linearly to its mature phase value during the next six years.
A. If Sime Natural Cosmetics is fairly priced in the marketplace, what is the expected rate of return on its shares?
B. If Sime were in its mature growth phase right now, would its expected return be higher or lower, holding all other facts constant?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...

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