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Questions and Answers
What does a high dividend yield often indicate?
What does a high dividend yield often indicate?
- A company's potential risks due to a falling stock price (correct)
- A company's low creditworthiness
- A company's low potential for capital appreciation
- A company's focus on growth and reinvestment
What is the primary purpose of using dividend yield in investment decision making?
What is the primary purpose of using dividend yield in investment decision making?
- To compare the income-generating potential of different stocks (correct)
- To calculate the market price of a stock
- To determine the creditworthiness of a company
- To evaluate the growth potential of a company
If a company pays an annual dividend of PHP 2.50 per share, and the current market price of the stock is PHP 50.00, what is the dividend yield?
If a company pays an annual dividend of PHP 2.50 per share, and the current market price of the stock is PHP 50.00, what is the dividend yield?
- 4.00% (correct)
- 3.00%
- 5.00%
- 2.00%
What is the interpretation of a dividend yield of 7%?
What is the interpretation of a dividend yield of 7%?
What type of investor may prefer stocks with higher dividend yields?
What type of investor may prefer stocks with higher dividend yields?
What does a low dividend yield often indicate?
What does a low dividend yield often indicate?
What can be used to compare the income-generating potential of different stocks?
What can be used to compare the income-generating potential of different stocks?
What is the dividend yield of AC Corporation's stock, which is currently priced at PHP 55 per share and pays an annual dividend of PHP 4.50 per share?
What is the dividend yield of AC Corporation's stock, which is currently priced at PHP 55 per share and pays an annual dividend of PHP 4.50 per share?
What is the main feature of cumulative preferred shares?
What is the main feature of cumulative preferred shares?
Which type of preferred share allows shareholders to receive the fixed dividend and then participate in the remaining profits alongside common shareholders without limit?
Which type of preferred share allows shareholders to receive the fixed dividend and then participate in the remaining profits alongside common shareholders without limit?
What happens if a company misses a dividend payment to cumulative preferred shareholders?
What happens if a company misses a dividend payment to cumulative preferred shareholders?
What is the main feature of callable preferred shares?
What is the main feature of callable preferred shares?
Which type of preferred share includes an option for the shareholder to convert their preferred shares to common shares?
Which type of preferred share includes an option for the shareholder to convert their preferred shares to common shares?
What is the result of a regular dividend payment to preferred shareholders?
What is the result of a regular dividend payment to preferred shareholders?
What is the main difference between fully participating preferred shares and partially participating preferred shares?
What is the main difference between fully participating preferred shares and partially participating preferred shares?
What happens if a company misses multiple dividend payments to cumulative preferred shareholders?
What happens if a company misses multiple dividend payments to cumulative preferred shareholders?
What is the primary difference between preferred stockholders and common stockholders in terms of dividend payments?
What is the primary difference between preferred stockholders and common stockholders in terms of dividend payments?
In the event of liquidation, which type of stockholders are paid out last?
In the event of liquidation, which type of stockholders are paid out last?
What is the primary characteristic of non-voting shares?
What is the primary characteristic of non-voting shares?
What is the primary benefit of holding preferred stock?
What is the primary benefit of holding preferred stock?
Which type of shares are traded on a public stock exchange?
Which type of shares are traded on a public stock exchange?
What is the primary difference between preferred stock and common stock in terms of liquidation?
What is the primary difference between preferred stock and common stock in terms of liquidation?
Which type of shares do not provide voting rights to their holders?
Which type of shares do not provide voting rights to their holders?
What is the primary benefit of holding common stock?
What is the primary benefit of holding common stock?
Study Notes
Dividend Yield
- Dividend yield is computed by dividing the annual dividend per share by the current market price of the security or the price per share x 100
- Interpretation: a dividend yield of 5% means that for every PHP 100 invested in the stock, the investor can expect to receive PHP 5 in dividends annually
- Uses of Dividend Yield:
- Income Generation: investors looking for regular income may prefer stocks with higher dividend yields
- Comparative Analysis: dividend yield allows investors to compare the income-generating potential of different stocks
- Investment Decision Making: helps in evaluating whether a stock fits an investor's income needs and risk tolerance
Types of Preferred Shares
- Cumulative Preferred Shares:
- provides shareholders with preferential treatment regarding dividend payments and liquidation proceeds
- ensures that missed dividend payments are accumulated and must be paid out before any dividends can be distributed to common shareholders
- Fully Participating:
- allows shareholders to receive the fixed dividend and then participate in the remaining profits alongside common shareholders without limit
- Partially Participating:
- allows shareholders to receive the fixed dividend and then participate in the remaining profits up to a certain additional amount or cap
- Callable Preferred (Redeemable Shares):
- gives the issuing company the right to repurchase the shares at a predetermined price after a certain date
- Convertible Preferred:
- includes an option for the shareholder to convert their preferred shares into common shares at a predetermined ratio
Classification of Shares
- By Voting Rights:
- Voting Shares: grant the shareholder the right to vote on corporate matters
- Non-Voting Shares: do not provide voting rights, often issued to raise capital without diluting control
- By Market:
- Listed Shares: traded on a public stock exchange
- Unlisted Shares: not traded on public exchanges and are typically privately held
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Description
Learn about dividend yield, its calculation, and uses in finance, including income generation and comparative analysis.
