Trivia Thursday! - Test Your Dividend Knowledge
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Trivia Thursday
It’s always a good idea to flex your brain from time to time—so dust off your dividend knowledge and take on the trivia challenge below!
The first person to post the correct answers in the comments will win a complimentary 1-month paid subscription to Quality At A Fair Price.
The paid subscription includes access to:
The Quality High Growth Investable Universe
The High Yield Dividend Tracker
A Custom Free Valuation Tool (downloadable)
The Dividend Aristocrat Spreadsheet (downloadable)
The Dividend Kings Spreadsheet (downloadable)
All paywalled Posts.
All questions are multiple choice. Just comment the sequence of correct letter answers (e.g., A, B, C...) to win the prize.
Good luck!
1. What’s The Dividend Yield?
You invest in stock XYZ, which currently pays an annual dividend of $3.78. You paid $134.98 per share. What was your forward dividend yield at the time of purchase?
A. 2.80%
B. 2.83%
C. 2.87%
D. 2.90%
2. Losses Hurt More Than Gains
You invest in stock XYZ, and one week later, President Trump announces new tariffs. Shares of XYZ sell off, and your investment is down 40%. What percentage gain is needed to break even?
A. 40.00%
B. 50.00%
C. 60.00%
D. 66.67%
3. What’s the Yield on Cost?
You buy stock XYZ with an initial yield of 2.80% and hold it for 5 years. XYZ increases its dividend by exactly 15% annually. What is your effective Yield on Cost after 5 years?
A. 4.89%
B. 5.12%
C. 5.63%
D. 6.47%
4. Impact of Dividend Growth
Stock A has a 6% dividend yield and grows its dividend by 2% annually. Stock B has a 2% yield but grows dividends by 10% annually. Assuming both are priced the same today, after how many years will Stock B pay a higher dividend than Stock A?
A. 9 years
B. 13 years
C. 16 years
D. 20 years
5. Best Dividend Growth Rate
Which stock has the highest 5-year dividend growth rate?
Hint: The growth rates (not in answer order) are: 18.78%, 14.23%, 11.58%, 10.27%
A. Automatic Data Processing ADP 0.00%↑
B. Cintas Corporation CTAS 0.00%↑
C. Mastercard MA 0.00%↑
D. TJX Companies TJX 0.00%↑
Post your answers in the comments below—good luck and have fun!
Here are the answers and the math behind them.
1. Yield
$3.78 / 134.98 = 0.0280041488 * 100 = 2.80%
Correct Answer was A
2. Losses and Gains
This one is easiest to breakdown as a number problem. Say you purchased $100 worth of stock XYZ. After a 40% decline your original $100 investment is worth $60. $100 * -40% = $60. To breakeven you will now need to gain $40. $40 / $60 = 66.67%
Correct Answer was D
3. Yield on Cost
There was a little spoiler in this question as the stated yield (2.80%) was the correct answer to question 1. There are several ways to calculate the answer. The simplest is to take 2.8% and multiply it by 1.15 five times. That will give you 5.63%. You could also use the following formula 2.8% * (1.15)^5 that also yields 5.63%.
Correct Answer was C
4. Dividend Growth
This is also easier solved when turned into a numbers problem. Since both stocks are priced the same at time today, lets just assign them a price of $100. This way we know Stock A pays a $6 dividend and Stock B pays a $2 dividend. You can then multiply Stock A's $6 dividend by 1.02 and Stock B's $2 dividend by 1.1 in a spreadsheet until Stock B's dividend exceeds Stock A's dividend. It takes 16 years for Stock B to pay $8.35 which is higher than Stock A's $8.08.
Correct Answer was C
5. Best Growth Rate
This question was really a guess or you could have looked up each company's 5-year dividend growth rate. Cintas has the best 5 year DGR of 18.78% according to Seeking Alpha.
Correct Answer was B
I've have A,C,A,B,D. Thanks this was fun!