# Dividend Yield Ratio

# Dividend Yield Ratio:

## Definition:

**Dividend yield ratio** is the relationship between dividends per share and the market value of the shares.

Share holders are real owners of a company and they are interested in real sense in the earnings distributed and paid to them as dividend. Therefore, *dividend yield ratio* is calculated to evaluate the relationship between dividends per share paid and the market value of the shares.

## Formula of Dividend Yield Ratio:

Following formula is used for the calculation of dividend yield ratio:

Dividend Yield Ratio = Dividend Per Share / Market Value Per Share

## Example:

For example, if a company declares dividend at 20% on its shares, each having a paid up value of $8.00 and market value of $25.00.

**Calculate dividend yield ratio:**

### Calculation:

Dividend Per Share = (20 / 100) × 8

= $1.60

Dividend Yield Ratio = (1.60 / 25) × 100

= 6.4%

## Significance of the Ratio:

This ratio helps as intending investor is knowing the effective return he is going to get on the proposed investment.

### You may also be interested in other articles from “financial statement analysis” chapter:

- Horizontal and Vertical Analysis
- Ratios Analysis
- Horizontal Analysis or Trend Analysis
- Trend Percentage
- Vertical Analysis
- Accounting Ratios Definition, Advantages, Classification and Limitations:
- Gross profit ratio
- Net profit ratio
- Operating ratio
- Expense ratio
- Return on shareholders investment or net worth
- Return on equity capital
- Return on capital employed (ROCE) Ratio
- Dividend yield ratio
- Dividend payout ratio
- Earnings Per Share (EPS) Ratio
- Price earning ratio
- Current ratio
- Liquid/Acid test/Quick ratio
- Inventory/Stock turnover ratio
- Debtors/Receivables turnover ratio
- Average collection period
- Creditors/Payable turnover ratio
- Working capital turnover ratio
- Fixed assets turnover ratio
- Over and under trading
- Debt-to-equity ratio
- Proprietary or Equity ratio
- Ratio of fixed assets to shareholders funds
- Ratio of current assets to shareholders funds
- Interest coverage ratio
- Capital gearing ratio
- Over and under capitalization
- Financial-Accounting- Ratios Formulas
- Limitations of Financial Statement Analysis

### Other Related Accounting Articles:

- Fixed Assets Turnover Ratio
- Dividend Payout Ratio
- Return on Equity Capital (ROEC) Ratio
- Current Assets to Proprietor’s Fund Ratio
- Return on Shareholders Investment or Net Worth Ratio
- Over trading and Under Trading
- Proprietary Ratio or Equity Ratio
- Financial Accounting Ratios & Formulas
- Fixed Assets to Proprietor’s Fund Ratio
- Debt Service Ratio or Interest Coverage Ratio

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