Question

Please complete the following definitions

2 – a) Which is more critical to the dividend decision, earnings or cash flow? Explain.

b) Suppose the Board of Directors of The Staten Island Suppliers Co. announces on October 4th that the regular quarterly dividend of 50 cents per share will be payable to the holders of record at the close of business on November 15th 2019.

What date is the declaration date, the holder of record date, the ex-dividend date, and the payment date?

c) Why is the ex-dividend date important to investors?

3 - For Apple (AAPL) traded on Nasdaq, 2018 was an unusual year for dividends. What were the dividend declaration dates, the DPS for each quarter, the ex-dividend dates for each quarter and the percent increase in the dividend when it was raised?

4 - How much does Apple plan to spend on its repurchase plan (also called “buyback plan?”)

5 – a) What are the 4 broad sets of factors that affect dividend policy?

b) List and briefly explain (in your own words) the constraints that limit the power of the Board of Directors to declare dividends.

c)How do investment opportunities affect dividend policy?

d) How does the availability and cost of outside capital (external capital) affect dividend

6 – a) What’s the difference between a stock dividend and a stock split? b) How do stock dividends and splits affect stock prices?

c) In what situation should a firm pay a stock dividend?

d) In what situation should a firm split its stock?

e) Consider the following case: You have 100 common shares of The Staten Island

Suppliers Co. (CSI) The EPS is $4.00, the DPS is $2.00; and the stock sells for $60 per share. If CSI does a two-for-one stock split how many shares will you have; what will be the new EPS and DPS; and what would you expect the stock price to be?

Answer 1

Answer(2)(a): Dividend is the monetary benefit that is distributed to the shareholders out of the net profit. For dividend purpose, earnings are more important because if there is no earning, no dividend or lower earnings, lower dividend and higher earnings, higher dividends. Dividend is calculated on the face value. A part of company's earnings is keep aside to distribute it to shareholders as dividend, some companies reinvest their profit into the business for further expansion purpose. These companies are growing so their stocks are growth stocks and not the dividend paying stocks.

Answer(b):

Declaration date = It is the date on which company declares dividend to the shareholders. It is October 4, 2019.

Record date = It is the date on which company checks the eligibility of shareholders to get the dividend. On this date, shareholder must be in company's books to receive the dividend. It is the cut off date.

Ex-dividend date = It is one business day before the record date. This date is also important to tell you whether you are eligible for the dividend or not. This is the date on which stock trades without the upcoming dividend. If record date is March 20 then the ex-dividend date will be March 18.

Payment date = It is the date on which dividend is credited to the shareholders' accounts. It is November 15, 2019.

Answer(c): As we discussed that Ex-dividend date is one business prior to the record date. Ex-dividend is important for the investors because if they want to get the dividend, they have to buy the shares before the ex-dividend date. If an investor nuys share on ex-dividend date, he will not be entitled to the dividend.