The stock of Turner United is priced at $46 a share and has a dividend yield of 2.1 percent. The...

Question:

The stock of Turner United is priced at $46 a share and has a dividend yield of 2.1 percent. The firm pays constant annual dividends. What is the amount of the next dividend per share?

a) $0.021

b) $0.210

c) $0.966

d) $0.096

e) $0.219.

Dividend Yield:

The dividend yield is calculated as annual dividends divided by the market price per share. It is expressed as a percentage and it is used in comparing the performance of company stock with other stocks of similar companies. Dividend yield measures the dividends received in terms of the current stock price.

Answer and Explanation:

The correct answer is C

The dividend yield is calculated using the following formula.

  • {eq}Dividend\ yield = \frac{Annual\ dividend}{Current\ stock\ price} {/eq}

Therefore,

  • {eq}2.1\% = \frac{Annual\ dividend}{\$46} {/eq}

We solve for annual dividend

  • {eq}Annual\ dividends = 0.021 * 46 {/eq}
  • {eq}Annual\ dividend = $0.966 {/eq}

Since the firm pays a constant annual dividend, the current dividend which is $0.966 be the same for the next dividend.


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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