At the market close on October 27 of a recent year, McDonald’s Corporation had a closing stock price of

At the market close on October 27 of a recent year, McDonald’s Corporation had a closing stock price of $93.49. In addition, McDonald’s Corporation had a dividend per share of $2.44 during the previous year.

Determine McDonald’s Corporation’s dividend yield. (Round to one decimal place.)


Answer:

Dividend Yield = Cash Dividends per Share of Common Stock
Market Price per Share of Common Stock
Dividend Yield = $2.44
$93.49 = 2.6%





The market price for Microsoft Corporation closed at $30.48 and $27.91 on December 31, Year 1, and Year 2, respectively. The dividends per share were $0.52 for Year 1 and $0.52 for Year 2.

a. Determine the dividend yield for Microsoft on December 31, Year 1, and Year 2.
(Round percentages to two decimal places.)

b. Interpret these measures.


Answer:
a.
Year 1: Dividend Yield = $0.52 ÷ $30.48 = 1.71%
Year 2: Dividend Yield = $0.52 ÷ $27.91 = 1.86%

b. Dividends per share remained constant from Year 1 to Year 2. In addition, the dividend yield increased from 1.71% in Year 1 to 1.86% in Year 2. The increase in the dividend yield is a result of a slight decrease in the stock price. Microsoft provides a small return to the shareholder in terms of a dividend yield and an additional return in terms of price appreciation of the stock.