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Question
Nicer Corporation reported net income of $50,000 in the current year. There are 10,000 shares of $100 par, 6% preferred stock and 50,000 shares of $2 par common stock outstanding. During the year, Nicer paid the preferred stockholders a $6-per-share dividend and also paid $30,000 to common shareholders. The market value of Nicer’s preferred stock is $95, and of Nicer’s common stock, $5.
a. Compute the dividend yield for Nicer Corporation.
b. Why does the dividend yield vary widely across firms?
Answer
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