...Corporate Payout Policy Select three publicly listed companies. Analyse their recent dividend decisions and use these to support your critical assessment of the main theories of corporate payout policies. Dividend policy is one of the most important decisions that a manager of a firm makes in order to achieve the goal of the firm, maximising shareholder wealth. Determining a company's corporate payout policy is a question of "how much, when, and how", that is, the value of the payouts, when to deliver the surplus cash to investors, and in what form should the payouts be delivered. Corporate payout policy is also one of the most polarising topics in finance. Theorists such as DeAngelo and DeAngelo (2006a, 2006b, 2008), and Fama and French advance a theory on the financial life-‐cycle of the firm determining dividend policy. Other academics are less sanguine about how dividends affect the value...
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...Title Payout Policy Analysis – Apple Computer Word Count: 1,952 Contents Page Executive summary 1 Introduction 2 Main Body 2 Conclusion and recommendations 7 Bibliography 8 Executive summary The main aim of this report is to interpret Apple’s recent change in payout decision and to evaluate the impact of the new policy on shareholders’ value and Apple’s strategy. Firstly, previous and current payout policy will be described separately. Then, by analyzing firm’s previous and current circumstance including the change of the CEO, some considerable changes in Apple and the underlying reasons, are worth to discuss. This report concludes that the current payout policy—paying dividends along with the buyback plan—is more suitable for current company. Finally, implications of the new policy will be analyzed through using relevant and irrelevant theories as well as relevant data of competitors in the same industry. This report predicts that under the current good momentum of development, if Apple can hold this situation, it is prioritized to maintain this new policy. Introduction It is a Payout policy appraisal of Apple Computer which is reported to the firm’s shareholders or investors. The objectives of this report are shown below: * Analyze the pros and cons on recent change in payout policy. * Evaluate implications of the new policy on shareholder’s value and Apple’s financing and investment strategy. For a more detailed image analysis, some secondary...
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...AF4320 Corporate Finance Semester 1, 2013-2014 Individual Written Assignment This essay will trace the dividend payouts of three public companies in the last consecutive fifteen years and find the key factors which affect a company’s payout policy. The three public companies, namely Hutchison Whampoa Limited (HWL), CLP Holdings Limited (CLP), and The Bank of East Asia (BEA), are all the constituent stocks of the Hang Seng Index. HWL Dividend Payout History over Last Fifteen Years Figure 1.1 A glance at the figure provided reveals changes in HWL’s dividend payout in the last consecutive fifteen years. During this period, HWL’s dividends per share (DPS) climbed steadily from $1.16 to $2.08, with only four changes, while the company’s earnings per share (EPS), an indicator valuating a company’s financial performance in terms of how much earnings made for equity holders, fluctuated greatly, ranging from a low of $1.72 to a peak of $27.65. It should be noted with great attention that HWL’s DPS had remained unchanged at $1.73 for ten consecutive years before it rose again to $1.92 in 2010. Dividend Policy As one of the biggest corporations in Hong Kong, HWL has long been dedicated to providing stably increasing returns to its investors (HWL, Annual Report 2012). The actual dividend payouts follow quite consistent with the company’s statement: four moderate rises without any decrease, as demonstrated by the above figure. Figure 1.2 The dramatic difference between the...
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...shares. But even though their earnings are decreasing, they are confident about financial year 2015. This is the reason why they are paying dividend of 14.5 cents per share which is 86% of the basic earnings per share. • Issue of Shares This year they issued shares of 4516000. It shows that they have a positive outlook for 2015 and are planning to expand in the next year. This is in line with their dividend payout ratio as stated above. • Decrease in Sales: Particulars 2013 2014 Sales 3144904000 3143027000 This may be because of increase in competition from both international and online retailers, along with the depreciation in the value of the Australian dollar which impacted margins. Also, Myers recently closed two stores which can be another reason for the fall in the value of sales from the previous year. • Increase in COGS: Particulars 2013 2014 COGS 1443005000 1455066000 This increase in COGS can be attributed to the depreciation of Australian dollar. Also, the raw materials used by the company are expensive due to Myer’s Ethical Sourcing Policy which makes the company committed to source merchandise produced in safe working conditions, where the human rights of workers are respected and environmental impacts are managed. The fall in Sales and increase in COGS has in turn led to an adverse effect on Net profit. • Corporate Social Responsibility: Myers has a greater percentage of women workers. It also invests a lot in minimizing the impact of operations...
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...will this proposal affect the stock price? How will it affect the value of the company? Electronic Timing, Inc. (ETI) needs to be careful on how it dispenses the extra cash as a dividend. Issuing the extra cash as a dividend would mean that the shareholders collectively will probably drop by the same amount because of the transfer of wealth from the company to the shareholders individually. Hence, the economic value of the company will also decrease. 2. Jessica believes that the company should use the extra cash to pay debt and upgrade and expand it existing manufacturing capability. How would Jessica's proposals affect the company? Jessica's proposal will support an expansionary policy for the company which can result to a higher growth rate for ETI. As to the company's dividend policy, not issuing the extra cash as a dividend signals to the market that there are still better and more efficient uses of the cash than using it for dividends. 3. Nolan is in favor of a share repurchase. He argues will increase the company's P/Ratio, return on assets, and return on equity. Are his arguments correct? How will a share purchase affect the value of the company? A share repurchase if done correctly should be equivalent to the issuance of a cash dividend with the same amount as regards to effects on shareholders' wealth. The way the share repurchases should be done in a way that it does not diminish or create shareholders wealth. Hence, Nolan's argument that the company's return...
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...Question 1 Home Depot (“HD”)Strategy The home improvement industry was a large one with industry sales approximated at $80bn dollars in 1985 and had grown at a compounded annual growth of 14% over the last 15 years. HD’s strategy was to bring the warehouse retailing concept to the home center industry, a DIY concept in a warehouse which sold an array of building materials and home improvement products on a cash and carry basis. The company targeted individual homeowners and small contractors as it customers. The strategy had important elements which included offering low and competitive prices, were situated in suburbs and stores were also the warehouse which allowed HD to keep overheads low and pass savings to customers. They also serviced mainly “sunny” areas which would be more conducive and aligned to their family driven DIY concept. HD carried approximately 25000 stock keeping units thus increasing convenience and minimising out of stock occurrences. They offered customers the nationally advertised brands as well as lesser known brands accompanied by guarantees from either HD or the manufacturer. The biggest value add to their strategy was the sales assistance, whereby they employed largely on a full time basis, skilled, technically apt employees who were also trained further at HD, to enhance their sales offering. To complement the above HD embarked on aggressive advertising programs to attract customers. The last part of the strategy was to grow the...
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...2012 Level II Mock Exam: Afternoon Session The afternoon session of the 2012 Level II Chartered Financial Analyst (CFA®) Mock Examination has 60 questions. To best simulate the exam day experience, candidates are advised to allocate an average of 18 minutes per item set (vignette and 6 multiple choice questions) for a total of 180 minutes (3 hours) for this session of the exam. By accessing this mock exam, you agree to the following terms of use: This mock exam is provided to currently registered CFA candidates. Candidates may view and print the exam for personal exam preparation only. The following activities are strictly prohibited and may result in disciplinary and/or legal action: accessing or permitting access by anyone other than currently registered CFA candidates and copying, posting to any website, e-mailing, distributing, and/or reprinting the mock exam for any purpose. Marcus Pinto Case Scenario A struggling asset management company recently hired Marcus Pinto, CFA, as chief operating officer (COO). Pinto’s first responsibility is to recommend to the Board of Directors how they can lower costs while still retaining the firm’s client base and how to increase assets under management. Pinto analyzes the firm, its clients’ needs, and general market conditions before presenting his findings to the Board of Directors. At the presentation, he makes the following statements: Statement 1: “If the company adopts the CFA Institute Standards of Professional Conduct, the...
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...Table of Contents Introduction: Page 2 Central Content: Page 9 Quantitative Analysis: Page 9 Profit, Equity, and Share Value Management: Page 10 Debt Management: Page 15 Cash management: Page 18 Asset management: Page 21 Qualitative Analysis: Page 23 Organizational Citizenship: Page 24 Strategic Positioning: Page 30 Summary: Page 33 Appendix: Page 38 PCS Data Sheets: Page 38 Works Cited: Page 89 Introduction Boston Beer Company (SAM) is one of the fastest growing breweries in the United States of America currently holding the largest market share of craft brewers in the country, and 6th largest of all brewers. Founded in 1984 in Boston, Massachusetts and staying true to both its local and family roots, this high quality beer has become an icon throughout the nation. Another extremely successful and predominant corporation in the beverage-alcohol industry is that of Anheuser-Busch Inbev SA (BUD) which will serve for the purposes of this paper as a benchmark for how a firm should be performing and operating in this field. Being that Anheuser-Busch has been operating since 1852, has 13 breweries nation-wide, and is one of the most iconic breweries in the world, it truly is a unique comparison of “David vs. Goliath” for these two companies. The History of the Boston Beer Company Jim Koch, founding member of The Boston Beer Company, has a long proud history of brewing a robust, full flavored beer in his family. In fact, it was his great-great grandfather...
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...Swenson chose to pay out dividends, she would have to also decide upon the magnitude of the payout. A subsidiary question is whether the firm should embark on a campaign of corporate-image advertising, and change its corporate name to reflect its new outlook. The case serves as an omnibus review of the many practical aspects of the dividend and share buyback decisions, including (1) signaling effects, (2) clientele effects, and (3) the finance and investment implications of increasing dividend payouts and share repurchase decisions. This case can follow a treatment of the Miller-Modigliani[1] dividend-irrelevance theorem and serves to highlight practical considerations to consider when setting a firm’s dividend policy. Suggested Questions 1. In theory, to fund an increased dividend payout or a stock buyback, a firm might invest less, borrow more, or issue more stock. Which of those three elements is Gainesboro’s management willing to vary, and which elements remain fixed as a matter of the company’s policy? 2. What happens to Gainesboro’s financing need and unused debt capacity if: a. no dividends are paid? b. a 20% payout is pursued? c. a 40% payout is pursued? d. a residual payout policy is pursued? Note that case Exhibit 8 presents an estimate of the amount of borrowing needed. Assume that maximum debt capacity is, as a matter of policy, 40% of the book value of equity. 3. How might Gainesboro’s various providers of capital...
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...1. Introduction 2.1. objectives of finical analyses According to the financial analysis, investors or corporations can be aware of corporation’s performance in the current year or pass. Generally, investors and managers will go through different data to measure by corporation’s profitability ratio, liquidity ratio, gearing ratio and investment ratio. All of this ratio will lead them to understand corporation’s current position, operational efficiency, and financial situation, perdition of profitability and growth prospect through financial analysis. It either gives the information and significance to guiding the corporation managers to improve its services or change marketing strategy.it is also important to check out the corporation’s financial error and handle it in time. As investors, they can realize how well the corporation done within a year and what the corporation will do in the next year and what is their strategic planning when they go through the entire financial analysis report. Then depend on their own experience and knowledge, they will design where they go. It may be make them stay on or leave out or increase their capital into same corporation because of corporation‘s profit and bonus keep going up or redistributed their capital into different corporation to reduce their investment risk. * Banyan tree holidays limited company 2. Firm, industry, and environment 2.1. Descriptions of firm and its management Ban Yan Tree Holidays Limited is...
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...shareholders and retained earnings.’ ( http://finance.mapsofworld.com/corporate-finance/investment-decision/dividend.html ) Dividend decision is also called dividend policy, which has always been disputed. However, no matter how it is debated, dividend policy is very important to the healthy and orderly operation of a company. In the fist place,this essay will discuss the effect of different dividend policies on companies running, secondly indicate dividend decision should be changed to be fit for different growth periods and various investment opportunities, thirdly investigate how the refunding ability and cost of a company are affected by dividend policies, after that this paper will talks about the relationship between dividend decision and the structures of control rights to an enterprise, finally this article will evaluate the M&M theory and further prove that the importance of dividend policies for a corporation. There are diverse types of dividend policy, and each policy has different influence on corporations. Generally,Constant Payout Ratio (CPR), Constant Dollar Dividend Policy(CD), and Regular with Extras (RE) are three mainstream dividend policies. ( http://finance.mapsofworld.com/dividend/policy.html )Taking CPR as example, dividend takes stable proportion of corporation’s profit in this policy, and this policy usually will be enforced for a long time; asTestdfddfdfdf fggf...
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...17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 Financial Management Spring 2013 Chapter 10 Data Case Data COC, Debt Debt / Capitalization Equity / Capitalization Tax rate COC, Equity WACC, AT Growth rate ROI, new invest B C D E F G H I J rD rE rWACC g ROI 3.48% 77.90% 22.10% 17.93% 39.70% for AA bonds from BS from BS average of (2011, 2010) by backing out! The CAPM estimation will be quite different! verification 11.00% We will use WACC for DDM! 11.00% given 4.00% given 11.00% by assumption Q. 1. Yahoo! Finance summary info as of Price 1/25/2013 EPS (TTM) 1/25/2013 22.18 1.29 Q. 2. Yahoo! Finance key statistics info as of Shares O/S 1/25/2013 10,450,000 in '000 Payout ratio 1/25/2013 26.00% This is wrong! DPS (TTM) 1/25/2013 0.70 DPS (Fwd) 1/25/2013 0.76 Q. 3. Yahoo! Finance analyst estimates as of E(Growth, 5 yr) 1/25/2013 Q. 4. Yahoo! Finance competitors as of P/E (TTM, Industry) 1/25/2013 54.26% This is correct! 11.06% 15.72 Q. 5. Yahoo! Finance financial statements as of Income stmt 1/25/2013 Balance sheet 1/25/2013 Vora. BDH2E_C10_DataCaseSol: Sol Page 1 of 3 MGMT 326: Spring 2013 Chpt 10 (Stocks): Data Case Solution A 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 CF stmt B 1/25/2013 C Extra 5.03% 0 0.70 D E F G H I J Q. 6-A. Dividend discount model Sustain growth g...
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...Business report for Sky City Entertainment Group Limited and tourism industry. Contents Introduction 3 Discussion of findings 3 Industry background 3 Investigation of Financial information 5 Accounting elements 5 Ratios analysis 6 Profitability and Efficiency Ratios 6 Financial Stability Ratios 7 Financial Structure Ratios 7 Investment Ratios 8 Share Market Data 8 Brokers Recommendation 8 Share performance 9 Conclusion: 9 Recommendations 9 Reference List: 10 Appendix 11 Introduction The purpose of investigating the Sky City Group Limited (SKC) and tourism industry is to give a financial advice to a client who has recently asked for it in Vision Consultancy Limited. The sources of information and data used are reliable as it was retrieved from trustworthy websites such as: company’s website, Statistics NZ, NZX company research, tourism industry association New Zealand and Investorwords. The limitations of this business report are that financial statements of SKC used are for previous business year. And SKC does not disclose inventory turnover figure, consequently this ratio cannot be calculated. Also, there might be an increase in tourism after the Hobbit movie is released. Discussion of findings Industry background According to Tourism Industry Association New Zealand (2012), tourism is a fundamental contribution to New Zealand’s economy and way of life. It contributes close to 10% of gross domestic product (GDP), the earning for...
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...VMWM Research Department, March 31, 2014 WEEKLY STOCK PICKS Disclaimer: The following stock picks are for information purposes only. The information stated herein may reflect the opinion and views of VM Wealth Management in relation to market conditions and does not constitute any representation or warranties in relation to investment returns and the credibility of the sources of information relied upon in the preparation of this report, without further research and verification. Before making any investment decision, please consult a VM Wealth Management Advisor. STOCK STOCK DATA LAST TRADED PRICE: $18.05 4 WEEK PRICE MOVEMENT NCBJ RECOMMENDATION & RATIONALE RECOMMENDATION: BUY RATIONALE: The Company reported relatively flat earnings for the 3 months ended Dec 31. However, our outlook for NCBJ over the medium- to long-term is positive on the basis of an improving economy and ongoing structural changes at the Company, which could lower operating costs. NCBJ National Commercial Bank Jamaica YTD CHANGE: 0.28% P/E RATIO: 5.16x 20 19 18 17 P/B RATIO: 0.61x LAST TRADED PRICE: J$8.60 YTD CHANGE: 2.14% DCOVE Dolphin Cove Ltd P/E RATIO: 13.29x DCOVE 9 8.5 8 RECOMMENDATION: BUY RATIONALE: The majority of the Company's income is in US currency, which provides a good currency hedge for investors. The improving global economy should also provide tailwinds. The Company’s continuing expansion plans should continue to result in significant revenue and...
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...Firm Analysis Step 1 we choose the following two stocks: Netflix Sector: Services. Industry: Music & Video Stores. Industry info : In this industry there is a huge competition between all the companies however, the music and video industry is very far away from declining. Growth is always occuring to that industry new companies are always introduced and old companies struggle to stay in the market. Consumers never lose their apetite. However, technologies change new companies get in and old get out. but in my point of view the industry will always be profitable. Netflix is an example of an expanding company in an expanding industry for various reasons: Since Netflix is still getting revenues despite of the fierce comptetion in the movie sector. They still have a growing base of customers and consumers. Netflix did also manage in creating the new movie/tv shows rentals mentality after shifting from sending DVDs through mail into unlimited streaming. And now netflix expanded even more and began producing their own shows. That growth in their profit and Netflix's ability to adapt with the the market and consumer habbits netflix is still far away from stagnation. Sprint Sector: Technology. Industry : Wireless Communications. We need to fill this Step 2 we went to the Wharton Research Database Services (WRDS): http://wrds.wharton.upenn.edu/ and downloaded the following data for our two stocks: • ACT = current assets, total; • LCT = current liabilities...
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