An investor interested in purchasing a company's shares for their income potential would be more interested in the company's dividend yield and payout ratios than its price-earnings ratio.

Question

Quizplus · Accepted Answer

Dividend yield and payout ratios directly relate to the income an investor can expect from owning shares, as they indicate how much a company pays out in dividends relative to its share price and earnings, respectively. The price-earnings ratio is more indicative of the share price relative to earnings, which is more relevant for assessing growth potential and valuation rather than income potential.

An Investor Interested in Purchasing a Company's Shares for Their