Which statement BEST describes the gross dividend yield of a company's share?

• A. Value of company's net assets divided by the number of shares.
• B. Gross annual dividend divided by the current share price.
• C. Company's after tax profit divided by the total cost of the dividend.
• D. Current share price divided by the earnings per share.

Answer: (B)

Gross dividend yield shows how much income you get from dividends for each dollar of share price. It is calculated by dividing the gross annual dividend per share by the current share price, giving a percentage. This uses the actual dividend income before tax and relates it directly to what you would pay to buy the share today. The other formulations mix up different concepts: asset value per share reflects what the company is worth per share, not the income from dividends; after-tax profit relative to dividend cost doesn’t map to the income you earn from owning the stock; and price divided by earnings per share is the price-earnings ratio, not dividend income relative to price. So dividing the gross annual dividend by the current share price is the correct description.