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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