Net dividend yield is defined as which formula?

Net dividend yield is defined as which formula?

• A. Annual dividend divided by market value times 100
• B. Market value divided by annual dividend times 100
• C. Annual dividend plus market value
• D. Dividend yield plus inflation

Answer: (A)

Dividend yield measures the cash return you get from owning a share, expressed as a percentage of its current price. The net dividend yield is calculated by dividing the annual dividend per share by the market price per share and multiplying by 100. This directly shows how much income you earn from dividends for each unit of currency you’ve invested in the stock. The other options don’t express a rate of return: using the reciprocal would give the price relative to the dividend, adding the two values mixes different quantities, and adding inflation to a yield isn’t a standard measure of return. For example, if the annual dividend is 2 and the price is 40, the yield is 2/40 × 100 = 5%.

Dividend yield measures the cash return you get from owning a share, expressed as a percentage of its current price. The net dividend yield is calculated by dividing the annual dividend per share by the market price per share and multiplying by 100. This directly shows how much income you earn from dividends for each unit of currency you’ve invested in the stock. The other options don’t express a rate of return: using the reciprocal would give the price relative to the dividend, adding the two values mixes different quantities, and adding inflation to a yield isn’t a standard measure of return. For example, if the annual dividend is 2 and the price is 40, the yield is 2/40 × 100 = 5%.