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Dividend yield
Dividend yield
Dividend yield
Dividend yield
Dividend yield
Dividend yield
Dividend yield
Dividend yield
Dividend yield
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Dividend yield

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dividend yield …

dividend yield
useful tool for the investors who wants to invest in shares

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  • 1. DIVIDEND YIELD BY :- PARMOD , KAPIL
  • 2. • A Dividend is a payment made by a company to its shareholders, usually as a distribution of profits. When a company earns a profit or surplus , it can either re-invest it on the business (called retained earnings), or it can distribute it to shareholders.
  • 3. INTRODUCTION • The Dividend Yield is the dividend per share, divided by the market price per share. • A financial ratio that shows how much a company pays out in dividends each year relative to its share price. • It is often expressed as a percentage. • Dividend yield is also known as Dividend-Price Ratio. • Dividend yield = Dividend per share/ Market Price per share.
  • 4. SIGNIFICANCE & INTERPRETATIONS • Dividend yield is used to calculate the earning on investment (shares) considering only the returns in the form of total dividends declared by the company during the year. • The ratio is important for those investors who purchase shares to earn dividend income. Also the shares that earn higher dividend income can be sold in the market at market at higher prices that usually results in higher profits for the investor.
  • 5. • Depending solely on dividend yield figure for making investment in a company may not be a wise decision. A high dividend yield percentage may be due to a recent decrease in the market price of the stock of the company due to sever financial troubles. It may have to reduce the price of shares in future that may further reduce the market value of its stock. Therefore, a company with attractive dividend yield figure may not always be the best option.
  • 6. • For Example :• If market price of a share = $ 100. Dividend during the year = $ 20. Dividend Yield = 20/100*100 = 20%. • If market price of a share = $ 80. Dividend during the year = $ 20. Dividend Yield = 20/80*100 = 25%.
  • 7. Example – Comparison of two companies: The following information is related to PQR & XYZ company for the year 2013 :PQR company XYZ company Cash dividend declared and paid during the year $7,50,000 $1,24,800 Common Stock $25,00,000 $12,00,000 Number of shares of common stock 50,000 24,000 Par value of a share $50 $50 Market value of a share $60 $52
  • 8. • Both the company belong to same industry. PQR is an old and well established company where a XYZ company. The historical data shows that the PQR has a stable annual dividend distribution to stock holders. • Required : calculate dividend yield ratio of both the companies. Which company would be recommend for investment in shares ? PQR Company Dividend yield ratio $7,50,000/50,000 $1,24,800/24,000 =$15 Dividend per share XYZ Company =$5.20 ($15/$60) x 100 ($5.2/$52) x 100 = 25% = !0%
  • 9. Thank You 

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