Question

In: Accounting

Dividend Yield The market price for Macro Corporation closed at $40.54 and $34.50 on December 31,...

Dividend Yield

The market price for Macro Corporation closed at $40.54 and $34.50 on December 31, current year, and previous year, respectively. The dividends per share were $0.60 for current year and $0.69 for previous year.

a. Determine the dividend yield for Macro on December 31, current year, and previous year. Round percentages to two decimal places.

Current year %
Previous year %

b. The dividend yield   from the previous year to the current year. This is a result of a(n)   in the dividend relative to stock price.

Solutions

Expert Solution

a)

Dividend Yield = Dividend per share /Current Market Price per Share

Hence,
Dividend Yield for Current year = $0.60 / $40.54 = 1.48%
Dividend Yield for Previous year = $0.69 / $34.50 = 2%

b)

The dividend yield decreases from the previous year to the current year. This is a result of a percentage Decrease in the dividend relative to stock price.

Explanation
Percentage increase in dividend = (Current year dividend - Previous year dividend) / Previous year dividend
                                               = ($0.60 - $0.69)/ $0.69
                                             = (13.04%)

Percentage increase in market Price
                    = (Current year market price - Previous year market price) / Previous year market price
                    = ( $40.54 - $34.50 ) / $34.50
                    = 17.51 %
We can see Percentage increase in dividend is in minus means dividend decreases while market price is increases from previous to current year.


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