Recher Corporation's common stock has a par value of $3 per share and has been stable at a total value of $270,000 on the company's balance sheet for several years. The total stockholders' equity at the end of this year was $1,023,000 and at the beginning of the year was $1,010,000. Net income for the year was $17,500. Dividends on common stock during the year totaled $4,500. The market price of common stock at the end of the year was $3.76 per share.The company's dividend yield ratio is closest to: (Round your intermediate calculations to 2 decimal places.)

A) 1.7%
B) 17.1%
C) 1.3%
D) 26.3%

Question

Celeste Martinez · Accepted Answer

Final Answer : C, Explanation :  The dividend yield ratio is calculated as (Annual Dividends per Share / Market Price per Share) * 100. Given that dividends totaled $4,500 and the market price per share is $3.76 at the end of the year, we first need to find the number of shares. The total value of common stock is $270,000 with a par value of $3 per share, so the number of shares is $270,000 / $3 = 90,000 shares. The annual dividends per share is $4,500 / 90,000 = $0.05. Therefore, the dividend yield ratio is ($0.05 / $3.76) * 100 = 1.33%, which rounds to approximately 1.3%.

Definitions

Learning Objectives

Learning Objectives

Related questions