The Zolo Co. just declared that it is increasing its annual dividend from $1.00 per share to $1.25 per share. If the stock price remains constant,then:
A) the capital gains yield will decrease.
B) the capital gains yield will increase.
C) the dividend yield will increase.
D) the dividend yield will also remain constant.
E) neither the capital gains yield nor the dividend yield will changE.

Question

Quizplus · Accepted Answer

When the dividend per share increases and the stock price remains constant, the dividend yield will increase. The dividend yield is calculated by dividing the annual dividend per share by the current stock price. The capital gains yield, on the other hand, reflects the change in the stock price and is not affected by the increase in dividend per share.