Murphy Inc. preferred stock currently pays a dividend of 17 per year and has a yield of 0.19....

Question:

Murphy Inc. preferred stock currently pays a dividend of 17 per year and has a yield of 0.19. What is the current price of Murphy's preferred stock?

Dividend Yield

When the dividend paid is computed as the percentage of the market price of that share, it is called the dividend yield. The dividend yield is different from the dividend rate. The dividend rate is the ratio of the dividend and the par value of the share, and the dividend yield is the ratio of the dividend and the market price of the share. The dividend payout is the ratio of the dividend paid and the earnings. These are some of the ratios related to dividend and dividend yield is one of them

Answer and Explanation:


The price of the preferred share is $89.47

Explanation

Dividend Yield = Dividend paid / Current Price

Here,

  • Dividend Yield = 0.19
  • Dividend paid = $17
  • Current price = ??

So,

0.19 = $17 / Current price

Current price = $17 / 0.19 = $89.47


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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