NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets
A company reports a profit after tax of Rs 120 crore, has 40 crore equity shares outstanding, and declares a total dividend of Rs 48 crore. Its shares trade at Rs 60. What is the dividend payout ratio and the dividend yield respectively?
The dividend payout ratio is 40% and the dividend yield is 2%. Payout is total dividend Rs 48 crore divided by profit Rs 120 crore. Dividend per share is Rs 1.20 on 40 crore shares, and dividing by the Rs 60 price gives a 2% yield.
- A40% and 2.0%Correct
- B30% and 3.0%
- C40% and 5.0%
- D25% and 2.0%
Explanation
Payout ratio = 48/120 = 40%. DPS = 48/40 = Rs 1.20. Dividend yield = 1.20/60 = 2%. Check: EPS = 3, DPS 1.2, 1.2/3 = 40%. Option C wrongly gives 5% by using a wrong DPS, and 30% or 25% misstate the payout.
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