Question

Apple's most recent quarterly dividend was $1.44 per share. In comparison, Microsoft's stock is being paid at a $2.40 annual rate per share. How can we tell which is a better rate of return for shareholders? How can we tell which company is plowing back more of their net income into the business? Show the calculation for both of these measures and do the comparisons between the two stocks for these questions.

Answer 1

For this we need to calculate dividend yield. Even though dividend yield is not the only measure of return, as it will also have capital gains in terms of share price increase over the period.

Apple share price	186
Dividend	1.44
Dividend yield	0.77%
Microsoft share price	97
Dividend	2.40
Dividend yield	2.47%

Clearly dividend yield of Microsoft is much more than apple hence apple is ploughing much more net income into the business as compare to microsoft.