The company's dividend payout ratio is closest to:A) 1.3%B) 1.7%C) 17.1%D) 26.3%

Question

Jonathan Martin · Accepted Answer

Final Answer : D, Explanation :  Dividend payout ratio is calculated by dividing the annual dividend per share by the earnings per share. In this case, the dividend per share is $0.65 and the earnings per share is $2.47, giving a dividend payout ratio of approximately 26.3% ($0.65/$2.47). Earnings per share = Net Income ÷ Average number of common shares outstanding*= $17,500 ÷ 90,000 shares = $0.19 per share (rounded)*Number of common shares outstanding = Common stock ÷ Par value= $270,000 ÷ $3 per share = 90,000 sharesDividend payout ratio = Dividends per share* ÷ Earnings per share= $0.05 ÷ $0.19 = 26.3% (rounded)*Dividends per share = Common dividends ÷ Common shares (see above)= $4,500 ÷ 90,000 shares = $0.05 per share (rounded)

The company's dividend payout ratio is closest to:

A) 1.3%
B) 1.7%
C) 17.1%
D) 26.3%

Definitions

Learning Objectives

Learning Objectives

Related questions