If a stock pays a dividend of $1.50 per share and the current price is $30, what is the dividend yield?

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Study for the Finance and Investment Challenge Test. Approaches include flashcards and multiple-choice questions with hints and explanations. Ready yourself to ace the exam!

Multiple Choice

If a stock pays a dividend of $1.50 per share and the current price is $30, what is the dividend yield?

Explanation:
Dividend yield measures the cash return you get from owning the stock, shown as a percentage of the price. It’s calculated as annual dividend per share divided by price per share. With a dividend of $1.50 and a price of $30, the yield is 1.50 ÷ 30 = 0.05, which is 5%. The other options would require different dividend amounts relative to the price (for example, 15% would imply a $4.50 dividend at $30, 0.5% would be $0.15, and 3% would be $0.90). Since the given numbers produce 5%, that’s the correct result.

Dividend yield measures the cash return you get from owning the stock, shown as a percentage of the price. It’s calculated as annual dividend per share divided by price per share. With a dividend of $1.50 and a price of $30, the yield is 1.50 ÷ 30 = 0.05, which is 5%. The other options would require different dividend amounts relative to the price (for example, 15% would imply a $4.50 dividend at $30, 0.5% would be $0.15, and 3% would be $0.90). Since the given numbers produce 5%, that’s the correct result.

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