ACCA Applied Skills · Financial Reporting · Calculation and interpretation of accounting ratios and trends to address users' and stakeholders' needs
Nora Co's profit for the year attributable to ordinary shareholders was $600,000 and its ordinary dividend was $450,000. It has 3,000,000 ordinary shares in issue and a market price of $3.00 per share. What is the dividend yield?
Dividend yield is 5.0%. Dividend per share is $0.15 ($450,000 divided by 3,000,000 shares), and dividing this by the $3.00 market price gives 5.0%. It measures cash return relative to the current share price.
- A5.0%Correct
- B7.5%
- C10.0%
- D15.0%
Explanation
Dividend per share = 450,000 / 3,000,000 = $0.15. Dividend yield = 0.15 / 3.00 = 5.0%. The 7.5% figure would come from dividing by the wrong base, and 15% is the dividend per share expressed as a percentage of $1.
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