What kind of information does the dividend payout ratio provide?
A) How much the dividend is in proportion to the stock's market price
B) What proportion of a share's earnings are paid out in dividends
C) How much profit each shareholder makes when he sells his shares of stock
D) How much dividend revenue a company earns on its short-term investments

Question

Quizplus · Accepted Answer

The dividend payout ratio provides information on what proportion of a share's earnings are paid out in dividends. It is calculated by dividing the annual dividend per share by the earnings per share.

Answer: A
 The dividend yield provides information on how much the dividend is in proportion to the stock's market price. It is calculated by dividing the annual dividend per share by the current stock price.

Answer: C and D
 The dividend payout ratio does not provide information on how much profit each shareholder makes when he sells his shares of stock or how much dividend revenue a company earns on its short-term investments.

What Kind of Information Does the Dividend Payout Ratio Provide