Using the dividend growth model and assuming a dividend growth rate of 5%, what is the rate of return for one of three key competitors?

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The dividend growth model is used to calculate the rate of return (ROR) on equity investments such as stocks. Using this model, and assuming a dividend growth rate of 5%, we can calculate the ROR for one of three key competitors. This is done by taking the current dividend payment per share, then multiplying it by the expected growth rate (5%) plus 1, which gives us a future value for the dividend payments. We then subtract that from the current market price and divide it by the current market price in order to get an ROR percentage figure.

For example if competitor A has a current market price of $50 per share with an annual dividend payment of $2 per share; then their ROR would be calculated as ($2 x 1.05) – $50 /$50 = 4%. If competitor B has a current market price of $30 with an annual dividend payment of $1; then their ROR would be ($1 x 1.05) -$30 /$30 = 3%. And finally if competitor C has a current market price of $100 with an annual dividend payment of $4; then their ROR would be ($4 x 1.05)-$100/$100 = 6%.

This method provides investors with insight into which stock may potentially provide better returns over time—however it should not be seen as investment advice as there are numerous other factors that need to be considered when making investment decisions such as industry trends or macro-economic conditions amongst many others.