### 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
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