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Bank of Bahrain and Kuwait has net income BD 8,250,000, at the end of 2019
Bank of Bahrain and Kuwait has net income BD 8,250,000, at the end of 2019. The bank has decided to distribute on common stockholders 35%. However, the BBK stock trading on the Bahrain Burse at BD 25 nowadays. If you know that the number of outstanding common stock is 500,000 share. Required: (8 marks) - Compute the following: 1 - Dividend Pay-out Ratio. 2- Retention Ratio. 3- Dividend Yield.
Expert Solution
Dividend per share = Total Dividend/ Number of Outstanding shares
= ( 8,250,000 * 35%) / 500,000
= 2,887,500 / 500,000
= BD 5.775
1. Dividend pay-out ratio = Dividend/ Net Income
= 2,887,500/ 8,250,000
= 35 %
2. Retention Ratio= 1- Dividend pay out ratio
= 1- 35%
= 65%
3. Dividend Yield = Dividend per share / Current price per share
= 5.775 / 25
= 20.625%
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