Symons Corporation has provided the following financial data:
Dividends on common stock during Year 2 totaled $2,500. The market price of common stock at the end of Year 2 was $2.01 per share.
-The company's dividend payout ratio for Year 2 is closest to:
A) 26.3%
B) 2.5%
C) 18.4%
D) 1.0%

Question

Symons Corporation has provided the following financial data:
   Dividends on common stock during Year 2 totaled $2,500. The market price of common stock at the end of Year 2 was $2.01 per share.
-The company's dividend payout ratio for Year 2 is closest to:
A) 26.3% 
B) 2.5% 
C) 18.4% 
D) 1.0%

Quizplus · Accepted Answer

Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $9,500 ÷ 50,000 shares = $0.19 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $250,000 ÷ $5 per share = 50,000 shares
Dividend payout ratio = Dividends per share* ÷ Earnings per share
= $0.05 ÷ $0.19 = 26.3% (rounded)
*Dividends per share = Common dividends ÷ Common shares (see above)
= $2,500 ÷ 50,000 shares = $0.05 per share (rounded)

Symons Corporation Has Provided the Following Financial Data