An equity dividend rate, also known as cash-on-cash, is the annual rate investors expect to receive on their equity investment. For example, suppose I invest $10,000 and expect to receive $1,500 annually from an investment. It may be calculated as: $1,500/$10,000 = .15 or 15%. There are a few different methods to estimate what a typical market participant expects to receive on their investment. One method is to extract that rate from comparable sales. If you know the financing involved and the overall capitalization rate, it is possible to extract the rate from that sale. Simply type these variables into the highlighted cells in the spreadsheet below and, voila! You’ve just extracted your first equity dividend rate. Feel free to download this spreadsheet by clicking the Excel button below.
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