Which component is included in the calculation of the dividend rate?

The dividend rate is a financial metric that represents the amount of income a shareholder will receive from owning a stock in the form of dividends, usually expressed as a percentage of the stock's price. To calculate the dividend rate, the total dividends paid annually is a crucial factor. This is because the dividend rate formula is typically formulated as:

Dividend Rate = (Total Dividends Paid Annually / Total Shares Outstanding) / Current Stock Price

In this context, total dividends paid annually reflects how much a company distributes to its shareholders, which can then be used to determine the return on investment for the shareholders.

The other options do not directly influence the calculation of the dividend rate in the way that total dividends paid annually does. For instance, the total number of shares outstanding is necessary for determining the per-share dividend amount, but it’s not part of calculating the dividend rate itself. The average stock price over the last year serves as a historical measure and does not impact the current dividend calculation. Similarly, net earnings indicate the company's profitability but do not directly calculate the dividend rate; they might influence dividend decisions made by the company, but are not included in the calculation itself. Thus, the total dividends paid annually is indeed the component that is correctly included in the calculation