Question

Q1/ please answer the question as the tables

The following selected information (in millions, except for per-share information) is available for National Bank of Canada for the year ended October 31:

		2015			2014
Weighted average number of common shares		333.1			331.1
Income available to common shareholders (equals net income)		$1,574			$1,498
Dividends declared and paid per common share		2.04			1.88
Dividends declared and paid on common shares		672			616
Average common shareholders’ equity		9,806			8,778
Market price per common share		43.31			52.68
Industry averages were as follows:
Payout ratio		45.5	%		44.8	%
Dividend yield		4.3	%		3.8	%
Basic earnings per share		n/a			n/a
Return on common shareholders’ equity		13.6	%		14.7	%

(a) Calculate the following ratios for the common shareholders for each fiscal year: (Round basic earnings per share to 2 decimal places, e.g. 5.24. Round payout ratio, dividend yield and return on common shareholders' equity to 1 decimal place. e.g. 5.2%.)

				2015			2014
1.		Payout ratio			%			%
2.		Dividend yield			%			%
3.		Basic earnings per share		$			$
4.		Return on common shareholders’ equity			%

Answer 1

(1)

note: see first basic earning per share below

payout ratio = dividends/net income

for 2015,

= $672/$1574 = 42.7%

for 2014,

= $616/$1498 = 41.1%

(2)

dividend yield = dividend per share/market price per share

for 2015,

= $2.04/$43.31 = 4.7%

for 2014,

= $1.88/$52.68 = 3.6%

(3)

basic earning per share = net income/weighted average number of common shares

for 2015,

= $1574/333.1

= $4.73 per share

for 2014,

= $1498/331.1

= $4.52 per share

(4)

Return on common stockholders equity = (net income - preferred dividends)/average common stockholders equity

for 2015,

= $1574/$9806

= 16.1%

for 2014,

= $1498/$8778

= 17.1%