The dividend yield is computed by dividing:
A) Annual cash dividends per share by earnings per share.
B) Earnings per share by cash dividends per share.
C) Annual cash dividends per share by the market value per share.
D) Market price per share by cash dividends per share.
E) Cash dividends per share by retained earnings.

Question

Quizplus · Accepted Answer

The dividend yield is calculated by dividing the annual cash dividends per share by the market value per share. This ratio measures the amount of cash dividends paid out to shareholders relative to the market value of the company's stock. It is one of the key metrics used by investors to evaluate the attractiveness of a stock investment. Option A is incorrect as earnings per share are not relevant to the calculation of dividend yield. Option B is incorrect as it calculates the inverse of dividend yield. Option D is incorrect as it calculates the price-to-dividend ratio. Option E is incorrect as it involves retained earnings which are not relevant to the calculation of dividend yield.

The Dividend Yield Is Computed by Dividing