SIE practice questioneasyDividend Yield
A stock pays an annual dividend of $2.40 per share and is currently trading at $60. What is the dividend yield?
- A4.0%✓ Correct answer
- B2.4%
- C25.0%
- D6.0%
Explanation
Why A — 4.0%
Dividend yield = Annual dividend per share / Current stock price = $2.40 / $60 = 0.04 = 4.0%. Dividend yield is a measure of the cash income generated by a stock relative to its price. It is similar to current yield for bonds. A higher dividend yield means more cash return per dollar invested in the stock.
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