...Dividend Policy at FPL Group, Inc. FPL Group, Inc., the Florida's largest electric utility company, after 47 years of uninterrupted increase in dividends, was considering cut dividends in 1994. How would this unusual move affect FPL and the investors? Meanwhile, what would Kate Stark, the analyst at the Equity Securities Corporation, recommend regarding investment in FPL's stock - buy, sell, or hold? 1. Current Dividend Policy at FPL • FPL’s current payout ratio = Dividend per Share/Earning per Share = 2.47/2.30 = 107.4%. (Exhibit 4b) High relative to other utilities (exhibit 9) • Current Dividend Yield = Dividend per Share/Price per Share = 2.47/33=7.5% (Exhibit 4b&Exihit 8) Average level among utilities • Historic Dividend Policy: 1985 through 1993, payout has risen from 62% to 107.4% ；While during the same period, percentage increases in dividends has decreased from 9.6% to 1.6% 2．Why FPL consider cut dividend? • Challenges facing the FPL Group in May 1994: ✓ High pay-out ration will be unsustainable: The advent of retail wheeling threatens to reshape the entire electric utilities industry. It will bring more challenges to FPL. ✓ Low capacity Margin: 8.6% (Exhibit 7) which means FPL has less room in term of growth compared to peers. Need to invest in capacity to deal with the increased competition. ✓ FPL has a large amount of debt, and reducing the dividend could facilitate FPL debt repayment. FPL stock has fallen dramatically...
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...Dividend Policy at FPL Group, Inc. Executive Summary Florida Power & Light Company was formed in 1925 through the consolidation of numerous electric and gas companies. After enjoying steady growth until the 1970s, FPL began experiencing operating problems and reduced profitability due to factors like rising fuel costs and construction over-runs. To address these problems, Chairman Marshall McDonald decided to diversify into higher growth businesses and guided FPL to make four major acquisitions- Colonial Penn Life Insurance Company, Telesat Cablevision, CBR Information Group Inc. and Turner Foods Corp. FPL Group also established a real estate development subsidiary called Alandco, and an alternative energy subsidiary called ESI Energy. To address complaints from consumers, FPL instituted a quality control program inspired from Japanese methodologies. Despite all these moves, FPL continued to face underlying growth problems due to losses at Colonial Penn business, federal concerns over FPL’s nuclear reactor safety and going overboard with their quality control program. James Broadhead succeeded McDonald in 1989 and started developing a long range strategic plan for FPL. Broadhead simplified the quality control program. He wanted FPL to focus on its core business and made plans to sell several non-utility businesses that the group held. Broadhead started an aggressive capital expenditure program of $6.6 billion for expansion. To cut costs, Broadhead flattened the organization...
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... Dividend Policy at FPL Group, Inc Case Q1) Why do firms pay dividends? What, in general, are the advantages and disadvantages of paying cash dividends? Ans: The purpose of dividend payouts is to return wealth back to the company shareholders instead of using it for operations. Dividends provide investors with regular income from their investments and act as an incentive to continue or start investing in the company. The company’s share price will drop in relation to the dividend payout, because a company’s value has not risen, they are just allocating money differently. All dividends must be declared by the board of directors and are taxable as income to the recipients. Taking into account the many theories of dividend policy including the Dividend Irrelevance, we can conclude that firms should pay out as dividends “any cash flow that is surplus after the firm has invested in all available positive net present value projects.” In some cases, this may be a way of signaling that the company is financially stable and capable of fulfilling dividend obligations. It may also be a way for companies to mitigate agency problems when they have excess cash. Advantages of paying cash dividends include: * A means of distributing excess cash and lacking in investment opportunities. * Use of Dividends as signal of financial health as dividends send a signal to current and future investors that the company is financially stable. * Dividends may attract...
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...Group Assignment 4 Dividend Policy at FPL Group, Inc. 1. Why do firms pay dividend? What, in general, are the advantages and disadvantages of paying cash dividends? The sole purpose of dividends per se is to return wealth back to the shareholders of a company. Shareholders take risk and invest in company and the dividends are rewards for commitment, trust and risk-taking. Dividends transfer economic value from the company to the shareholders instead of the company using the money for operations. Often in case of more established and mature companies that are growing more slowly they are not “hungry” for cash and to reward the shareholders by sharing the wealth those companies pay dividends. Similarly paying dividends often is a sign of sound business model and stability of company at large. Both paying and not paying dividends and cash dividends have their own respective pros and cons as presented below: Advantages: 1. Dividends may appeal to investors who desire stable cash flow but do not want to incur the transaction costs from periodically selling shares of stock. 2. Behavioral finance argues that investors with limited self-control can meet current consumption needs with high dividend stocks while adhering to the policy of never dipping into principal. 3. Managers, acting on behalf of stockholders, can pay dividends in order to keep cash from bondholders. 4. The board of directors, acting on behalf of stockholders, can use dividends to reduce the cash available...
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...FPL – An OverviewFPL Group, Inc. is Florida’s largest electric utility company. In 1925, through the consolidation of numerous electric and gas companies, they formed Florida Power & Light Company (FP&L). FP&L grew steadily over the next 50 years until rising fuel costs, operating issues, and construction costs began to decrease profitability. In the mid-1980s, FPL diversified with four major acquisitions - Colonial Penn Life Insurance Company, Telesat Cablevision, Inc., CBR Information Group Inc., and Turner Foods Corporation- in order to minimize the potential risk within the utilities industry. To address problems in operations, FPL began a rigorous program of Japanese-inspired quality control. Management succeeded in transforming FPL into a lean operational system resulting in a drop in scheduled downtime from 18% to 4%, while customer complaints also fell by 60%. By 1989, FPL was recognized as “one of the best-managed U.S. corporations.” Despite the progress in quality, FPL was still dealing with problems: Colonial Penn was losing money, there were safety concerns about a particular nuclear plant, and demand was growing faster than capacity. In 1989, James Broadhead succeeded Chairman Marshall McDonald. Broadhead placed an emphasis on commitment to quality and customer service, increasing focus on the utilities industry, expanding capacity, and improving cost positions. He took measures to scale back the intense quality controls while still working to preserve...
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...Case Analysis - FPL Energy FPL Energy is one of the nation’s leading independent generators of electricity. Dedicated to generating clean energy, 80 % of its capacity is fueled by clean and renewable resources. The United States is the nation with the largest generator of wind energy, and it operates the two largest solar fields in the world. FPL Group, with annual revenues of more than $8 billion, is one of the nation's largest providers of electricity-related services. Its principal subsidiary, Florida Power & Light Company, serves approximately 3.9 million customer accounts in Florida. FPL Energy, LLC, and FPL Group energy-generating subsidiary, is a leader in producing electricity from clean and renewable fuels. 2. Historical Overview FPL Group is a far different company today than the one Jim Broadhead joined in January of 1989 when he became president and chief executive officer. FPL Group was then engaged in a number of businesses unrelated to its core electric skills, including insurance and financial services, real estate, cable television, and agriculture. The company's principal subsidiary, Florida Power and Light, was considered a well-managed utility with an emphasis on quality. However, the utility's spiraling costs had resulted in electric rates among the highest in the Southeast. Today, FPL Group is nationally known as a high quality, efficient, and customer-driven organization focused on energy-related products and services. With a growing...
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...1. Why do firms pay dividends? What is general, are the advantages and disadvantages of paying cash dividends? Firms pay dividends based on their finance and investing strategies and decisions. If a firm is looking to finance a project through borrowing the company may want to give cash dividends to its shareholders to reduce the amount of their cash balances on hand. Also dividends are a way to give back to their investors and shareholders. By them receiving the cash dividends they are gaining immediate cash payment to spend in their own way or to reinvest with the company. Also stocks that offer dividends are sometimes more favorable to investors because they know they will be getting routine income from the stock. The advantages of paying cash dividends are based in what signals it gives to the market. If the company is giving out dividends and the dividends increase this is a good signal to the market that the company is doing well and that the stock is on the rise. Also, in times when the stock price decreases but the company continues to pay out the normal dividends it shows the market that the company is not nervous and will rebound back soon. Some disadvantages of paying cash dividends are that it can also give bad signals to the market. If dividends decrease it can signal to the market that the company is not doing well and the value of the stock will decrease. From this signal investors and shareholders might sell the stock, further driving down the stock price of...
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...consist of group work leading to (a) an active discussion and (b) a written report on one of the case studies. At the beginning of term, student groups will be randomly assigned to one of the following two cases: “Valuation of AirThread Connections” or “Dividend Policy at FPL Group, Inc.” Please find out which case you have been allocated to and the week in which that case is discussed. In the following I explain which deadlines you have to meet and how effort towards each deadline contributes to your coursework mark: • Deadline 1. You must read up your case material and prepare oral answers to the case questions by the Thursday lecture to which your case discussion is allocated. Groups that have not prepared before the case discussion will suffer a coursework mark penalty. The penalty will be 10 points of the coursework mark (e.g., a drop from 60% on your submission to 50% overall). Groups that have fully prepared and present their arguments during the class discussion in a lively and enthusiastic way will receive a 5-point coursework mark uplift (e.g., an increase from 70% to 75%). • Deadline 2. The next deadline is for submission of your complete case report. This must be done on Moodle, by the Thursday one week after the case discussion week. Therefore, the deadlines for submitting the written report are as follows: – Groups assigned to the AirThread case: Thursday 27 March – Groups assigned to the FPL case: Thursday 3 April. Advice on how to write the case report Each group will have...
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...specific cases that are assigned to this course are available for download for a fee. Group Papers/Presentations: Each student will be put into a group, and each group will submit a paper and present a particular case. The paper should include the answers to the questions regarding the case assigned prior to the presentation day. Presenting a case involves summarizing the case, answering the questions, and leading a class discussion for the case based on the questions. Please do not change groups during the semester. Peer Evaluations: To prevent free-riding, I will ask that each group member fill out a confidential peer evaluation report by the end of the course. You should use the form to outline each team member’s contribution (excluding your own). Failure to submit an evaluation will result in a penalty of your overall grade. Case #1: Financial Institutions/Intermediaries; Corporate Governance “The Role of Capital Market Intermediaries in the Dot-Com Crash of 2000” Case #2: Valuation “Mercury Athletic Footwear: Valuing the Opportunity” Case #3: Capital Budgeting “Tokyo Disneyland and the DisneySea Park: Corporate Governance and Differences in Capital Budgeting Concepts and Methods Between American and Japanese Companies” Case #4: Cost of Capital “Lex Service PLC - Cost of Capital” Case #5: Dividend Policy “Dividend Policy at FPL Group, Inc....
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...Article Writing,Assignments,Research Work,Home Work MenuSkip to content Home How We Work ? Refund Policy How to Order ? Disclaimer Contact Us Finance Cases List POSTED ON MARCH 8, 2013 Hello, If u want us to solve any case study from below list, do contact us anytime, We are here to provide the experience, expertise, and professionalism that you are looking for , Our tutors are available 24/7 to assist you what you need, Click Here to submit your Order. ======================================================================================= Acquisition of Consolidated Rail Corp. by Benjamin C. Esty Airbus A3XX: Developing the World’s Largest Commercial Jet by Benjamin C. Esty American Chemical Corp.by William E. Fruhan, John P. Goldsberry American Home Products Corp.by David W. Mullins AQR’s Momentum Funds by Daniel B. Bergstresser, Lauren H. Cohen, Randolph B. Cohen, Christopher Malloy Arundel Partners: The Sequel Project by Timothy A. Luehrman AXA MONY by Andre F. Perold, Lucy White Beta Management Co. by Michael E. Edleson Butler Lumber Co. by Thomas R. Piper Cartwright Lumber Co.by Thomas R. Piper Citigroup 2007: Financial Reporting and Regulatory Capital by Edward J. Riedl, Suraj Srinivasan Clarkson Lumber Co. by Thomas R. Piper Cooper Industries, Inc. by Thomas R. Piper Cost of Capital at Ameritrade by Erik Stafford, Mark L. Mitchell Debt Policy at UST, Inc. by Mark L. Mitchell Dell’s Working Capital by Richard S. Ruback DermaCare: Zapping Zits Directly...
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...of Business Administration ISSN: 1451-243X Issue 9 (2010) © EuroJournals, Inc. 2010 http://www.eurojournals.com Dividend Policy: A Review of Theories and Empirical Evidence Husam-Aldin Nizar Al-Malkawi Corresponding Author, Faculty of Business, ALHOSN University P.O. Box 38772 - Abu Dhabi, UAE E-mail: h.almalkawi@alhosnu.ae Michael Rafferty Senior Research Analyst, WRC, University of Sydney, Australia E-mail: m.rafferty@econ.usyd.edu.au Rekha Pillai Faculty of Business, ALHOSN University, Abu Dhabi, UAE E-mail: r.pillai@alhosnu.ae Abstract The literature on dividend policy has produced a large body of theoretical and empirical research, especially following the publication of the dividend irrelevance hypothesis of Miller and Modigliani (1961). No general consensus has yet emerged after several decades of investigation, and scholars can often disagree even about the same empirical evidence. This paper aims at providing the reader with a comprehensive understanding of dividends and dividend policy by reviewing the main theories and explanations of dividend policy including dividend irrelevance hypothesis of Miller and Modigliani, bird-in-the-hand, tax-preference, clientele effects, signalling, and agency costs hypotheses. The paper also attempts to present the main empirical studies on corporate dividend policy. However, due to the enduring nature and extensive range of the debate about dividend policy which has spawned a vast amount of literature that grows by the day, a full...
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...Project Financing Asset-Based Financial Engineering Second Edition JOHN D. FINNERTY, Ph.D. John Wiley & Sons, Inc. Project Financing Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding. The Wiley Finance series contains books written specifically for finance and investment professionals as well as sophisticated individual investors and their financial advisors. Book topics range from portfolio management to e-commerce, risk management, financial engineering, valuation, and financial instrument analysis, as well as much more. For a list of available titles, visit our Web site at www.WileyFinance.com. Project Financing Asset-Based Financial Engineering Second Edition JOHN D. FINNERTY, Ph.D. John Wiley & Sons, Inc. Copyright C 2007 by John D. Finnerty. All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. Wiley Bicentennial Logo: Richard J. Pacifico No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States...
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...system this situation affects the quality of care and places a financial strain on the government, individuals and families, employers and employees, and public and private providers. Most of the Medicare beneficiaries have to enroll in the MA program to help them to succeed and receive the adequate treatments without MA to help the disadvantaged seniors on the island, Puerto Rico's elderly citizens will be forced to turn to Mi Salud in larger numbers. Although Mi Salud is scheduled to receive an average of $690 million annually during the next five years, the widening deficit in MA funding is likely to create a net negative impact on federal funding for healthcare in Puerto Rico. The Health care Policies and Issues Ethical concerns and issues The Affordable Care Act (ACA) policies are intended to give patients more access to health care without any restrictions as in the past that were imposed by the Health Care Industry and at a reasonable cost capping the administrative costs to the industry to no more than 20% of what the insurance costs. These restrictions were based on how much a person paid for health insurance, the...
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...Changing the game. Annual Report to Stockholders 2012 Dear Stockholder, Welcome to TMUS. You are an owner of America’s Un-carrier — the combined entity of MetroPCS and T-Mobile USA. As the industry’s premier challenger and value player, we are revolutionizing the wireless industry. TM T-Mobile 2012 Annual Report 3 Building the Foundation In 2012, MetroPCS and T-Mobile built the foundations to become the Un-carrierTM in 2013. Each company made good progress across what are now the combined company’s five strategic priorities — the building blocks that enable us to bring consumers exciting new choices while delivering an exceptional experience. Here are notable 2012 highlights: Amazing 4G Services Increased Spectrum – T-Mobile increased its spectrum holdings in the top 100 metropolitan areas by nearly 20%. This includes spectrum secured as part of the AT&T deal breakup, as well as spectrum obtained through commercial deals with Verizon and Leap. Enhanced Network Experience – T-Mobile launched a three-year $4 billion network modernization investment program, ending 2012 with approximately 9,400 modernized sites; MetroPCS ended the year with 2.2 million customers and 26% of its base on LTE. Value Leader Launched Unlimited 4G Data – MetroPCS launched 4G LTE for All TM and T-Mobile introduced Unlimited Nationwide 4G Data. Secured the iPhone® – In December, T-Mobile announced that the iPhone would be available to T-Mobile customers in 2013. Accelerated Prepaid Growth...
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