Return on Common Stockholders’ Equity, Dividend Yield, and Dividend Payout The f

Question

Return on Common Stockholders’ Equity, Dividend Yield, and Dividend Payout

The following information relates to Litchfield, Inc.:

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 Net income $100,000 $140,000 Preferred stock dividends 15,000 15,000 Average common stockholders' equity 4,000,000 4,200,000 Dividend per common share 2.90 3.10 Earnings per share 5.80 5.90 Market price per common share, year-end 58.00 59.50

Explanation / Answer

Answer Calculation of following ratio: 2015 2016 a Return on common stockholder Equity 2.1% 3.0% (Net Income-Preferred dividend)/Average common stockholder equity*100) ($1,00,000-15,000)*100/40,00,000 ($1,40,000-15,000)*100/42,00,000 b Dividend Yield 5.0% 5.2% (Annual Dividend/Current Stock Price) *100 2.9/58*100 3.1/59.5*100 c Dividend Payout 50.0% 52.5% (Dividend per share/Net Income per share) *100 2.9/5.8*100 3.1/5.9*100

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