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Basic Question 4 of 4
Dividends yield
II. is used to evaluate cash flow adequacy.
III. evaluates profitability.
IV. is a measure of investor confidence in a company.
I. is a measure of the current return to an investor in a stock.
II. is used to evaluate cash flow adequacy.
III. evaluates profitability.
IV. is a measure of investor confidence in a company.
User Contributed Comments 5
| User | Comment |
|---|---|
| jmcarr02 | I would rather say: "dividend yield is a *partial or incomplete* measure of the current return to an investor in a stock". |
| tim2 | I'm not sure IV is that wrong. I recall a year or two back one of the highest yeilding stocks was GM which reflected investor worries that it was f*cked. Which proved justified. |
| rise10 | agreed... |
| Nando1 | tim2: To the point on IV, then this shows that the statement is not correct. |
| joywind | i think when it says current return here it assumes that no capital gain is realized. Therefore, dividend yield is the only component of the current return. |
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Learning Outcome Statements
calculate and interpret alternative price multiples and dividend yield;
calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS;
explain and justify the use of earnings yield (E/P);
describe fundamental factors that influence alternative price multiples and dividend yield;
calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals;
calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology;
evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables;
calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation;
calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model;
explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition;
calculate and interpret EV multiples and evaluate the use of EV/EBITDA;
CFA® 2025 Level II Curriculum, Volume 4, Module 23.