ACCA Applied Knowledge · Financial Accounting · Analysis of financial statements
Kestrel Co paid an ordinary dividend of $120,000 in the year. Profit after tax and preference dividends was $300,000. The market price per share is $4.00 and there are 500,000 ordinary shares. What is the dividend yield?
The dividend yield is 6.0%. Dividend per share is $120,000 divided by 500,000 shares, which is $0.24. Dividing by the $4.00 market price gives 6%. The 40% figure is the dividend payout ratio, not the yield, so it answers a different question.
- A6.0%Correct
- B10.0%
- C40.0%
- D24.0%
Explanation
Dividend per share = 120,000 / 500,000 = $0.24. Dividend yield = 0.24 / 4.00 = 6.0%. The 40% option is dividend payout (120/300), a different ratio. The 10% option uses wrong data.
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