Earnings per Share, Price-Earnings Ratio, Dividend Yield The following informati

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Earnings per Share, Price-Earnings Ratio, Dividend Yield

The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year:

The net income was $560,000 and the declared dividends on the common stock were $40,000 for the current year. The market price of the common stock is $21.00 per share.

For the common stock, determine (a) the earnings per share, (b) the price-earnings ratio, (c) the dividends per share, and (d) the dividend yield. If required, round your answers to two decimal places.

Common stock, $30 par value (no change during the year) $4,800,000 Preferred $4 stock, $200 par (no change during the year) 4,000,000

Explanation / Answer

a. Earnings per Share = (Net Income - Preferred Dividend) / No. of Common stock

No. of preferred shares = $4,000,000 / $200 = 20,000
Preferred Dividend = 20,000 x $4 = $80,000
No. of common stock = $4,800,000 / $30 = 160,000 shares

EPS = ($560,000 - $80,000) / 160,000 = $3.00

b. Price-Earnings Ratio = MPS / EPS
= $21 / $3 = 7 times

d. Dividend Yield = annual dividend per share / stock's price per share
= $0.25 / $21 = 1.19%

c. Dividends per Share = Dividend / No. of shares
= $40,000 / 160,000 = $0.25 per share

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