Which of the following is the ratio that shows that how much a company pays out in dividends each year relative to its share price?
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A. B. C. D.D
The ratio that shows how much a company pays out in dividends each year relative to its share price is the dividend yield. Therefore, none of the answer choices provided (A, B, or C) is correct.
Dividend per share (answer A) is a measure of the amount of dividend paid out to each individual shareholder. It is calculated by dividing the total amount of dividends paid out by the number of shares outstanding.
Dividend coverage ratio (answer B) measures a company's ability to pay its dividends from its earnings. It is calculated by dividing the company's earnings per share by its dividend per share.
Dividend earned ratio (answer C) measures the percentage of the dividend income relative to the total income earned by the investor. It is calculated by dividing the annual dividend income by the total annual income earned from all sources.
To calculate the dividend yield, divide the annual dividend paid per share by the current market price of the stock. This ratio shows the percentage return on investment that an investor can expect to receive in the form of dividends.
In summary, the correct answer is D, none of the provided options. The ratio that shows how much a company pays out in dividends each year relative to its share price is the dividend yield.