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?
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
Dividend Yield = Dividend paid / Current Price
- Dividend Yield = 0.19
- Dividend paid = $17
- Current price = ??
0.19 = $17 / Current price
Current price = $17 / 0.19 = $89.47
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from Corporate Finance: Help & ReviewChapter 2 / Lesson 10