Return on Common Stockholders\' Equity. Dividend Yield, and Dividend Payout The

Question

Return on Common Stockholders' Equity. Dividend Yield, and Dividend Payout The following information relates to Litchfield, Inc.: 2015 2016 Net income $160,000 $200,000 15,000 15,000 Average common stockholders' equity 4,000,000 4,200,000 3.50 3.70 5.90 Market price per common share, year-end58.00 59.50 Preferred stock dividends Dividend per common share Earnings per share 5.80 a. Calculate the company's return on common stockholders' equity for 2015 and 2016 b. Calculate the company's dividend yield for 2015 and 2016 c. Calculate the company's dividend payout for 2015 and 2016. Round answers to one decimal point. 2015 2016 449% 7.4 %96 7.3 x a. Return on Common Stockholder Equity 3.696 b. Dividend Yield c. Dividend Payout 6.2 %

Explanation / Answer

a) Calculation of return on common stockholder's equity: Return on common stockholder's equity= (Net income-preference dividend)/average common stockholder's equity*100 2015    Return on common stockholder's equity= (160000-15000)/4000000*100=3.6% 2016    Return on common stockholder's equity= (200000-15000)/4200000*100=4.4% b) Calculation of dividend yield: Dividend yield= Dvidend per share/ market price per share*100 2015 Dividend yield= 3.5/58*100=6.0% 2016 Dividend yield= 3.7/59.5*100=6.2% c) Calculation of dividend Payout: Dividend payout= Dvidend per share/Earning per share*100 2015 Dividend payout= 3.5/5.8*100=60.3% 2016 Dividend payout= 3.7/5.9*100=62.7%

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