Question

Edwardsville Paint Company pays an annual dividend of $0.80 per share, has earnings per share of $2.50, and sells for $35 a share. What is this company's dividend payout ratio?

A) 8%
B) 25%
C) 28%
D) 32%
E) 35%

Answer 1

The dividend payout ratio for Edwardsville Paint Company is calculated as ($0.80 / $2.50) * 100, resulting in a ratio of 32%. This ratio indicates the percentage of earnings distributed as dividends to shareholders.

Step-by-step explanation:

The dividend payout ratio is a financial metric that calculates the percentage of a company's earnings that are paid out to shareholders in the form of dividends. In this case, Edwardsville Paint Company pays an annual dividend of $0.80 per share and has earnings per share (EPS) of $2.50. To determine the dividend payout ratio, you divide the annual dividend by the earnings per share.

Here's the calculation:

Dividend Payout Ratio = (Annual Dividends per Share / Earnings Per Share) * 100

Plugging in the numbers for Edwardsville Paint Company:

Dividend Payout Ratio = ($0.80 / $2.50) * 100 = 32%

Therefore, the company's dividend payout ratio is 32%, which corresponds to option D.