What is a stock's price-to-dividends ratio?

by augustine , in category: Stocks and Equities , a year ago

What is a stock's price-to-dividends ratio?

Facebook Twitter LinkedIn Telegram Whatsapp

1 answer


by mazie , a year ago


The stock's price-to-dividends ratio, also known as the dividend yield or dividend price ratio, is a financial metric used to evaluate the profitability of an investment in a stock based on the dividends it pays out. It is calculated by dividing the annual dividend per share by the stock's current market price.

Mathematically, the formula for the price-to-dividends ratio is:

Price-to-Dividends Ratio = Annual Dividend per Share / Stock's Current Market Price

The ratio indicates the percentage return on investment that an investor can expect to receive in the form of dividends. It can be used to compare the dividend-paying ability of different stocks or to assess the attractiveness of a particular stock for income-oriented investors. A higher ratio suggests a higher dividend yield relative to the stock price, which may indicate a more attractive investment opportunity for dividend-seeking investors.