The following information is available for Dorman Company:
Which of the following statements is correct?
A) The dividend yield is 6.0%, which is of interest to investors seeking an increase in market price of their stocks.
B) The dividend yield is 6.0%, which is of special interest to investors seeking to earn revenue on their investments.
C) The dividend yield is 16.7%, which is of interest to bondholders.
D) The dividend yield is 16.7% which is an important measure of solvency.

Question

The following information is available for Dorman Company:  
Which of the following statements is correct?
A) The dividend yield is 6.0%, which is of interest to investors seeking an increase in market price of their stocks. 
B) The dividend yield is 6.0%, which is of special interest to investors seeking to earn revenue on their investments. 
C) The dividend yield is 16.7%, which is of interest to bondholders. 
D) The dividend yield is 16.7% which is an important measure of solvency.

Quizplus · Accepted Answer

The statement "The dividend yield is 6.0%, which is of special interest to investors seeking to earn revenue on their investments" is correct. Dividend yield is the ratio of annual dividends to the current stock price, expressed as a percentage. It is of interest to investors who are looking for a steady income from their investment in the form of dividends. Bondholders are not primarily concerned with the dividend yield, and a high dividend yield does not necessarily indicate solvency. The statement about an increase in market price is also incorrect as dividend yield is not directly related to market price.

The Following Information Is Available for Dorman Company