Question

a wall street journal quotation for a company has the following values: div: $1.12, pe: 18.3, close price: $37.22. calculate the approximate dividend payout ratio for the company. group of answer choices

Answer 1

The dividend payout ratio is approximately 55.2%. This implies that around 55.2% of the company's earnings per share ($2.03) is being distributed to shareholders as dividends ($1.12 per share).

The dividend payout ratio is a measure that indicates the proportion of earnings a company pays out to its shareholders in the form of dividends.

The formula for the dividend payout ratio is:

`\[ \text{Dividend Payout Ratio} = \frac{\text{Dividends per Share}}{\text{Earnings per Share}} \]`

Given:

Dividend per Share (div) = $1.12

Price-to-Earnings Ratio (PE) = 18.3

Close Price = $37.22

First, we need to calculate the earnings per share (EPS) using the price-to-earnings ratio (PE) and the close price:

`\[ \text{Earnings per Share (EPS)} = \frac{\text{Close Price}}{\text{PE}} \]`

`\[ \text{EPS} = (37.22)/(18.3) \approx 2.03 \]`

Now, use the dividend per share and earnings per share to find the dividend payout ratio:

`\[ \text{Dividend Payout Ratio} = (1.12)/(2.03) \approx 0.552 \]`

Therefore, the approximate dividend payout ratio for the company is approximately 55.2%. This means that around 55.2% of the earnings per share are being paid out to shareholders in the form of dividends.

the complete question:

A Wall Street Journal quotation for a company has the following values: div: $1.12, pe: 18.3, close price: $37.22. Calculate the approximate dividend payout ratio for the company.