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Good Morning,
I was working the below question for Dividend yield and cannot get to the answer.XYZ Co
XYZ Co is reviewing its’ performance for the year ended 30 June 20X5. The corporate objective of XYZ Co is to maximise the wealth of its shareholders. The financial results for XYZ Co for the last 2 years is as follows:
20X5
Dividend : 2M
Ordinary Shares : 15M
Share price : 2.12$20X4
Dividend : 2M
Ordinary Shares : 15M
Share price : 1.95$The par value of the shares of XYZ Co is $0.50 per share.
The way I calculated :
Dividend yield =
dividend share price / current share price
= 2/(15/0.5) / 2.12 = 3.1%Answer is as follows :
Feedback:
No. of shares = $15m/$0.50 = 30m shares
Dividend per share = $2.0m/30m shares = $0.067/share
Dividend yield = ($0.067/$1.95) x 100 = 3.4%I do not understand why they are using the share price at the start of year
Thank you for your reply.
My understanding is that to calculate the dividend yield, you have to take the current share price (2.12 and not share price at start of year of 1.95).
In the case of calculating the shareholder return, from that point I would understand that the denominator would be 1.95 since we do use the share price at start of year which is the closing of the previous year.
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