In general, how is a firm's growth rate in earnings per share affected by its dividend policy?
The dividend policy impacts retained earnings of the company. Higher the dividend lower will be the retained earnings and vice versa. The retained earnings represent profits which are plowed back into the business. These are used for investing in various projects which is expected to increase the earnings per share. Hence the restrictive dividend policy will generally increase the earnings per share if investments are made wisely by the management.
In general, how is a firm's growth rate in earnings per share affected by its dividend...
that a firm's recent earnings per share and dividend per share are $3.30 and $2.90, respectively Both are expected to grow at 6 percent. However, the firm's current P/E ratio of 30 seems high for this growth rate. The P/E ratio is expected to fall to 26 within five years. Compute the dividends over the next five years. (Do not round intermediate calculations. Round your final answer to 3 decimal places.) Years First year Second year Third year Fourth year...
XYZ Corporation has a dividend payout rate of 25%. The firm's current earnings of $18.50 per share are expected to grow at an annual rate of 5%, and its cost of equity capital is 10%. What is the firm's expected "price" per share? a. $19.425 b. $25.90 c. $46.25 d. $77.70
Alternative dividend policies Over the last 10 years, a firm has had the earnings per share shown in the following table: a.If the firm's dividend policy were based on a constant payout ratio of 40% for all years with positive earnings and 0% otherwise, what would be the annual dividend for 2016? b.If the firm had a dividend payout of $1.00 per share, increasing by $0.10 per share whenever the dividend payout fell below 50% for two consecutive years, what...
DFB, Inc., expects earnings this year of $ 4.41 per share, and it plans to pay a $ 2.65 dividend to shareholders. DFB will retain $ 1.76 per share of its earnings to reinvest in new projects with an expected return of 15.1 % per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. a. What growth rate of earnings...
Alternative dividend policies Over the last 10 years, a firm has had the earnings per share shown in the following table:. a. If the firm's dividend policy were based on a constant payout ratio of 40% for all years with positive earnings and 0% otherwise, what would be the annual dividend for 2017? b. If the firm had a dividend payout of $1.00 per share, increasing by $0.10 per share whenever the dividend payout fell below 50% for two consecutive...
Cost of retained earnings Dividend Valuation Model Next year dividends = $4 share Growth Rate = 10% Current Price = $45 per share. Please calculate the cost of retained earnings using Dividend Valuation Model.
ALTERNATIVE DIVIDEND POLICIES Rubenstein Bros. Clothing is expecting to pay an annual dividend per share of $1.4 out of annual earnings per share of $4.75. Currently, Rubenstein Bros.' stock is selling for $32.00 per share. Adhering to the company's target capital structure, the firm has $10 million in total invested capital, of which 60% is funded by debt. Assume that the firm's book value of equity equals its market value. In past years, the firm has earned a return on...
Grott and Perrin, Inc., has expected earnings of $3 per share for next year. The firm's ROE is 20%, and its earnings retention (plowback) ratio is 40%. If the firm's required rate of return is 15%, what is the present value of its growth opportunities (PVGO)?
REH Corporation's most recent dividend was $ 2.48 per share, its expected annual rate of dividend growth is 5%,and the required return is now 15%.A variety of proposals are being considered by management to redirect the firm's activities. Determine the impact on share price for each of the following proposed actions. a. Do nothing, which will leave the key financial variables unchanged. b. Invest in a new machine that will increase the dividend growth rate to 7% and lower the...
Alternative dividend policies Over the last 10 years, a firm has had the earnings per share shown in the following table . If the firm's dividend policy were based on a constant payout ratio of 40% for all years with positive earnings and 0% otherwise, what would be the annual dividend for 2019 . If the firm had a dividend payout of $1.00 per share, increasing by $0.10 per share whenever the dividend payout below 50% for two consecutive years,...