Question

hink is generally more important, a high dividend or a growing one? Explain. what do you think the amount of dividend per share paid by PepsiCo 10 years ago? What was the amount of Go to the Pepsicom Investors →Sharehod he PepsiCo website, follow the sequence below: chareholder Information Dividend Information Case/Exercise 25 Assume that you bough that you bought shares of XYZ 10 years ago and that XYZ has increased its dividend or for the last 10 years. Does this make certain that you have made a great investment? Be ready to discuss.

answer all questions below

Answer 1

1. I think, growing dividend is more important. An organisation can reinvest capital retained, instead of distributing dividends and generate higher revenues which eventually leads to increase in shareholders' wealth.This could be understood by the example of Microsoft.The progression of Microsoft (MSFT) through its life cycle demonstrates the relationship between dividends and growth. When Bill Gates' brainchild was a high-flying growing concern, it paid no dividends but reinvested all earnings to fuel further growth. Eventually, this 800-pound software "gorilla" reached a point where it could no longer grow at the unprecedented rate it had maintained for so long.So, instead of rewarding shareholders through capital appreciation, the company began to use dividends and share buybacks as a way of keeping investors interested. The plan was announced in July 2004, nearly 18 years after the company's IPO. The cash distribution plan put nearly $75 billion worth of value into the pockets of investors through a new 8-cent quarterly dividend, a special $3 one-time dividend, and a $30 billion share buyback program spanning four years. In 2019, the company is still paying dividends with a yield of 1.32%.
2. Ten Years ago Pepsi paid a dividend of $5.24 in four payouts ($1.27 in March, $1.30 in June, $1.32 in September,$1.35 in December)
3. No, It does not make it certain that my investment has been good. As discussed in answer one, if the company had invested the dividends distributed it could have reaped better returns and would have resulted in higher EPS. Thus receiving higher dividend is not a proof of certainty that, the investment was a good one.