Final answer:
The correct formula for the dividend yield is 'Dividends per Share of Common Stock ÷ Market Price per Share of Common Stock,' which is option a. It represents the percentage of the share price paid as dividends annually.
Step-by-step explanation:
The correct formula for the dividend yield is a. Dividends per Share of Common Stock ÷ Market Price per Share of Common Stock.The dividend yield is a financial ratio that indicates the percentage of a company's share price that it pays out in dividends each year. It's an important measure for investors who are interested in the income generated from their investment in the form of dividends. To calculate it, you take the annual dividends paid per share and divide it by the current market price of the share. This gives investors an idea of the return they can expect from dividend payments relative to the stock's price. For example, if a company pays an annual dividend of $4 per share and its current stock price is $100, the dividend yield would be 4%.Conclusion In summary, when calculating the dividend yield, you take the annual dividends per share and divide them by the stock's current market price to get the yield as a percentage. It's a key indicator of investment income potential for stockholders.