An increase in dividend yield is most likely to be caused by:
A) Increased profits
B) Increased earnings per share
C) Increased market value per share
D) Decreased market value per share

Question

Quizplus · Accepted Answer

Dividend yield is calculated as the annual dividends per share divided by the price per share. If the market value per share decreases while the dividend remains constant or increases, the dividend yield will increase. Choices A and B may lead to an increase in dividends but not necessarily an increase in dividend yield if the market value per share also increases. Choice C would actually decrease the dividend yield, as the denominator in the dividend yield calculation increases.

An Increase in Dividend Yield Is Most Likely to Be