Which one of the following correctly describes the dividend yield? Multiple Choice Next year's annual dividend divided by today's stock price This year's annual dividend divided by today's stock price This year's annual dividend divided by next year's expected stock price Next year's annual dividend divided by this year's annual dividend The increase in next year's dividend over this year's dividend divided by this year's dividend

Next year's annual dividend divided by today's stock price

Explanation:

Dividend yield is a financial ratio which is used by investors to assess a company's annual dividend payout in comparison of its stock price. The formula for dividend yield ratio is :

Annual dividend / Stock price

The annual dividend used is the most recent dividend paid or is to be paid to shareholders of the company. It enables investors to assess the return on their investment in each stock price. Dividend yield increases when companies pay more dividends. It is a good signaling effect for shareholders.