What is the relationship between dividends per share and market price per share called?

The relationship between dividends per share and market price per share is referred to as dividend yield. This financial metric is crucial for investors, as it provides insight into how much dividend income they can expect to earn relative to the price they pay for a share of the company's stock. The dividend yield is calculated by dividing the annual dividends paid per share by the market price per share.

For example, if a company pays an annual dividend of $2 per share and its stock is priced at $40, the dividend yield would be 5% ($2 ÷ $40). This ratio is particularly useful for investors who are focused on income generation from their investments, such as retirees or those seeking regular cash flow. Therefore, dividend yield serves as a measure of the return on investment in terms of dividends, allowing investors to compare the relative attractiveness of different dividend-paying stocks.