Dividend Yield Ratio Examples

Definition: Dividend Yield Ratio is a financial ratio used to measure the rate of return on an investment.

Formula:
Dividend Yield Ratio = (Dividend Per Share / Market Price Per Share) * 100%

Example 1:
Calculate the Dividend Yield Ratio, given the following figures:
Ordinary share dividend $20,000
Preference share dividend  $3,000
Ordinary shares of $1 each: $40,000
Preference shares of $1 each: $30,000
Share premium $26,000
Retained earnings $37,000
The market price per ordinary share is $2.50

Solution:
Dividend Per Share = 20,000 / 40,000 = $0.50
Dividend Yield = (0.50 / 2.50) * 100% = 20%

Example 2:
Ordinary shares ($1 each):  $600,000
7% Preference shares ($1 each):   $400,000
Net profit after tax   $188,000
Dividends paid - Ordinary shares    $60,000
                        - Preference shares $28,000
Retained profits    $122,000
Price per ordinary share  $2.00
Calculate the Dividend yield.

Solution:
Dividend Per Share = 60,000 / 600,000 = $0.10
Dividend Yield = (0.10 / 2.00) * 100% = 5%

* Next: Return on Capital Employed (ROCE) Ratio
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Kelvin Wong Loke Yuen is an experienced writer with a strong background in finance, specializing in the creation of informative and engaging content on topics such as investment strategies, financial ratio analysis, and more. With years of experience in both financial writing and education, Kelvin is adept at translating complex financial concepts into clear, accessible language for a wide range of audiences. Follow him on: LinkedIn.

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