Read dividend yield without mistaking it for a promise: test your skills
Some companies pay out part of their profit. Yield shows the payout relative to the price — and a very high yield can be a warning. Answer each question to see the explanation; your score appears at the end.
This test checks that you can
- Calculate dividend yield
- Explain why a very high yield can be risky
- Understand payout ratio and reinvesting
- Practice
1. Dividend yield equals…
- Practice
2. A sudden very high yield may mean…
- Practice
3. Are dividends guaranteed?
- Key idea
4. Which statement best explains "Yield moves with price"?
- Key idea
5. Which statement best explains "Dividends are a choice"?
- Key idea
6. Which statement best explains "Reinvesting compounds"?
- Action plan
7. In the action plan, which step comes first?
- Mistake to avoid
8. Which of these is a mistake this lesson warns against?
- Mistake to avoid
9. Which of these is a mistake this lesson warns against?
A company earns $4 per share and pays $3 in dividends. What is the payout ratio?
Show the answer
75%
$3 ÷ $4 = 0.75.
Calculate the yield of a made-up $1.20 dividend on a $30 share.
More tests in this bootcamp
- What is a stock? Understand ownership and risk
- Compare common and preferred shares
- Follow a stock trade from quote to exchange
- Measure company size with market capitalization
- Read dividend yield without mistaking it for a promise
- Decode the P/E ratio: price compared with profit
- Understand growth and value investing styles
- Follow an IPO from offer price to public trading
- Tell a stock split from share dilution
- Understand market rises, falls and recovery math
- Final exam: Stocks and the market