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Chapter 19
4.4 Dividend cover
This is a measure of how many times the company’s earnings could
pay the dividend.
Profit available for ordinary shareholders
Dividend cover = –––––––––––––––––––––––––––––––––
Dividend for the year
The higher the cover, the better the ability to maintain dividends if
profits drop.
4.5 Dividend yield
This is a direct measure of the wealth received by the ordinary
shareholder.
DPS
Dividend yield = –––––––––––––––––– × 100
Market price per share
No capital growth is taken into account.
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