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A company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized,...

Question:

A company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The earnings per share is $4.53. The current market value of the stock is $20.00.

The dividend yield is:

a. 22.7%.

b. 12.1%.

c. 4.2%.

d. 3.9%.

e. 2.8%.

Dividend Yield


The Dividend Yield is a investor ratio it means it is calculated from the point of view of the investor. This ratio represents how much cash dividend is paid against the current market price of the sahre. It means how much percentage of dividend is being paid on the current price of the share.

Answer and Explanation:


Answer

The correct answer is option (e) 2.8%

Explanation

Dividend = (Cash Dividend Paid / Current Price of Stock) * 100

Cash Dividend Paid = $0.55

Current Market Value of Stock = $20

So, Dividend Yield = ($0.55 / $20) * 100 = 2.75% or 2.8% (after rounding off)


Learn more about this topic:

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What Is Dividend Yield? - Definition & Calculation

from Corporate Finance: Help & Review

Chapter 2 / Lesson 10
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