You own the stock of SageTech and its current price is $55.00/share. It pays no dividend today. Based on your own research, you expect SageTech to pay its first dividend of $3.80/share at the end of Years 1 and 2 (12 and 24 months from now). Given its performance outlook, you further expect the Board of SageTech to increase the Year 3 dividend by 10% to $4.18; and then to increase it by 3% annually for the next 5 years (end of years 4 through 8); after which it will grow by 1.5% annually forever.
You enjoy a number of investment alternatives that will, on average, provide you with a 9.0% annual return. In light of this, should you buy more SageTech stock at the current $55 price; or should you sell all your current SageTech holdings and reinvest the proceeds elsewhere?