Which of the following statements correctly describes either the dividend yield or earnings per share?
A) The dividend yield decreases when net income increases.
B) Earnings per share are per share of both common and preferred stock.
C)The dividend yield increases when the market price per share decreases.
D)Earnings per share decreases when dividends per share decrease.

Question

Quizplus · Accepted Answer

The dividend yield is calculated by dividing the annual dividend per share by the market price per share. So, if the market price per share decreases, the dividend yield increases.

The other statements are incorrect. Net income and dividends per share are both used to calculate the dividend yield, but net income has no direct impact on the yield. And earnings per share are generally only based on common stock unless specified otherwise. Finally, dividends per share decreasing would have a direct impact on the dividend yield, but not on earnings per share.

Which of the Following Statements Correctly Describes Either the Dividend