Asked by Roshan Paudel on May 21, 2024
Verified
A company that has 25,000 shares of $5.00 par value common stock issued and outstanding paid a dividend of $0.40 per share. The market value of the stock is $16 per share. The company's dividend yield is
A) 2.5%
B) 400%
C) 16%
D) 40%
Dividend Yield
The dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price.
Par Value
The face value of a bond or the stock value stated in the corporate charter.
Common Stock
A type of equity ownership in a corporation, representing a claim on a portion of the company's profits and assets.
- Calculate and interpret dividend yield for investment analysis.
Verified Answer
AT
Anita TorresMay 25, 2024
Final Answer :
A
Explanation :
Dividend yield is calculated as the annual dividend per share divided by the current market value per share.
Annual dividend per share = $0.40
Market value per share = $16
Dividend yield = ($0.40/$16) x 100% = 2.5%
Annual dividend per share = $0.40
Market value per share = $16
Dividend yield = ($0.40/$16) x 100% = 2.5%
Learning Objectives
- Calculate and interpret dividend yield for investment analysis.