Certified Management Accountant Practice Exam 2025 – The Comprehensive All-in-One Guide to Exam Success!

The formula for calculating the Dividend Yield is derived from the relationship between the dividends paid to shareholders and the market price of the stock. Specifically, the Dividend Yield is expressed as the amount of dividends paid per share divided by the market price per share of the stock.

This relationship provides a measure of the return on investment from a dividend-paying stock, indicating how much cash flow an investor is receiving for each dollar invested in the stock at its current market price. By using the dividends per share in the numerator and the market price per share in the denominator, the formula effectively describes the percentage yield that an investor can expect based on their investment in the shares at that moment.

Thus, the correct formula is indeed Dividends per Share divided by Market Price per Share, which gives a clear picture to investors regarding the income they are generating from their investments relative to the stock's market value.