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NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets

A stock has a market price of ₹600, earnings per share of ₹30 and a dividend per share of ₹9. What are its price-earnings ratio and dividend payout ratio respectively?

The P/E is 20 times (₹600 divided by EPS of ₹30) and the dividend payout ratio is 30% (₹9 dividend divided by ₹30 EPS). The 70% figure would be the retention ratio, and 1.5% is the dividend yield.

  1. A20 times and 30%Correct
  2. B20 times and 1.5%
  3. C66.7 times and 30%
  4. D20 times and 70%

Explanation

P/E = 600 / 30 = 20 times. Payout ratio = DPS / EPS = 9 / 30 = 30%. The 1.5% figure is dividend yield (9/600), a different measure, and 70% is the retention ratio.

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