Question

Which statement below best defines what a dividend yield is: Group of answer choices A. the...

Which statement below best defines what a dividend yield is:

Group of answer choices

A. the last annual dividend divided by the current market price per share.

B. the last annual dividend divided by the current book value per share.

C. next year's expected dividend divided by the current market price per share.

D. next year's expected dividend divided by the current book value per share.

E. next year's expected dividend divided by the par value per share.

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Homework Answers

Answer #1

Option A best defines the dividend yield. The reason is when the investor calculates the yield he will divide it by market price by him to hold the stock. calculating the dividend yield by dividing with the book value will not give the correct value as it takes the price to share in the firms book into consideration.

Option C,D,E are wrong because, dividend yield is calculated based on the dividends announced in the previous year but not on the expected future dividends which may or may not be announced by the companies.

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