US CMA Part 2 · Chapter 2 · Question 8 of 15
Sutton Paper paid dividends of $1.20 per share. Its earnings per share were $3.00 and its share price is $30.00. What are its dividend yield and dividend payout ratio?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Dividend yield 4.0%; payout ratio 40%
Explanation
Dividend yield = dividends per share / market price = $1.20 / $30.00 = 4.0%. Payout ratio = dividends per share / EPS = $1.20 / $3.00 = 40%. 60% is the retention ratio, and 10.0% is the earnings yield.
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