The calculation for dividend yield on ordinary shares is:
A) annual dividend divided by earnings.
B) market price divided by dividend per share.
C) dividend per share divided by market price per share.
D) annual dividend divided by number of ordinary shares.

Question

Quizplus · Accepted Answer

Dividend yield on ordinary shares is the dividend payment per share divided by the market price per share. This formula gives an indication of the percentage return an investor can expect from the dividend income on a particular share investment. Option A is incorrect as it involves earnings, which are not part of the calculation for dividend yield. Option B is incorrect as it involves dividing the market price by the dividend per share, whereas the correct formula should involve the dividend per share divided by the market price per share. Option D is incorrect as it divides the annual dividend payment by the number of shares, which does not account for the price changes of individual shares.

The Calculation for Dividend Yield on Ordinary Shares Is