CFA Level I · CFA Level I Exam · Sources of Equity Returns
A share's price rises from €50.00 to €53.00 over a year, and the share pays quarterly dividends of €0.50. Dividends are not reinvested. The share's dividend yield based on the beginning price is closest to:
The dividend yield is about 4.0%. Four quarterly dividends of €0.50 total €2.00 for the year, and dividing by the beginning price of €50.00 gives 4.0%. The 6.0% figure is the price return, not the yield, and 1.0% counts only a single payment.
- A1.0%
- B4.0%Correct
- C6.0%
Explanation
Annual dividends = 4 x 0.50 = €2.00. Dividend yield = 2.00/50.00 = 4.0%. The 6.0% option is the price return, and 1.0% uses only one quarterly dividend (0.50/50).
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