ABC Corp. earned $4.20/share last year and paid $1.20 in dividends on an average price of $50/share. The dividend yield on the stock was_____ and the payout ratio was_____ .
A) 2.4%; 29%
B) 2.4%; 71%
C) $1.20/year; 29%
D) 8.4%; $1.20/share

Question

Quizplus · Accepted Answer

The dividend yield is calculated as the annual dividends per share divided by the price per share, so $1.20 / $50 = 0.024 or 2.4%. The payout ratio is the dividends per share divided by the earnings per share, so $1.20 / $4.20 = 0.2857 or approximately 29%.

ABC Corp Earned $4