Question

The following stock quotation were recently reported in The Wall Street Journal:

10.3 AT&T T 3.6 21 39.43 0.26
0.1 Boeing BA 1.6 31 88.91 -0.85
-8.7 JohnsJohns JNJ 2.5 16 60.26 -0.08

a. What are the dividend yields on the common stock of AT&T Boeing, and Johnson & Johnson?

b. What possible explanation can you give for the differences in the common stock dividend yields observed in Part A?

c. What is the current price-earnings ratio for Boeing and Johnson & Johnson?

d. What possible explanation can you give for the difference in the price-earnings ratio observed in Part C?

e. What was the previous day's closing price for AT&T's common stock?

Answer 1

-a: The dividend yield for AT&T is 3.6%; for Boeing it is 1.6%; and for Johnson & Johnson it is 2.5%.
-b: The difference is the expected earnings and dividend growth, with AT&T likely having the lowest expected growth and Boeing the highest expected growth.
-c: P/E for Boeing = 31 times , P/E for Johnson and Johnson = 16 times
-d: Boeing’s higher expected growth rate more than offsets the relatively lower expected risk of Johnson & Johnson, Boeing has the higher P/E ratio which indicate the investor's expectations about their future returns.