Reynolds Metals common stock is selling for $25 a share and has a dividend yield of 3.1 percent....

Question:

Reynolds Metals common stock is selling for $25 a share and has a dividend yield of 3.1 percent. What is the dividend amount?

Cash Dividends:

Companies that are in mature industries have low top-line and earnings growth. To keep investors attracted towards the stock, these companies pay robust dividends and have a healthy dividend yield. These companies are preferred for investment by income investors who seek regular cash flows and defensive stocks.

Answer and Explanation:

.

Given -

  • Stock Price (Po) = $25
  • Dividend Yield (Dy) = 3.1% = 0.031

The formula to calculate the dividend yield is as follows -

  • Dividend Yield (Dy) = {eq}Do / Po {/eq}

Since other value are provided, the dividend (Do) can be calculated.

  • Dividend (Do) = {eq}Po * Dy {/eq}
  • Dividend (Do) = {eq}25 * 0.031 {/eq}
  • Dividend (Do) = {eq}$0.78 {/eq}

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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