Dividend Policy

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Question 1

If we take a look at the company’s compounded annual growth rate in EPS we can see that Georgia Atlantic’s growth rate is really low compared to the industry average. Furthermore we can see from the first table that Georgia Atlantic’s P/E ratio is also lower in all the years as compared to the industry and the M/B ratio is also relatively low compared to the industry. Due to the fact that Georgia Atlantic is operating in a relatively mature market, there is a very low possibility for growth, that’s why we consider Georgia Atlantic as a low growth company. For low growth companies it is normal to have a low P/E ratio and a low B/M ratio because most of the company’s value comes from their current operations and assets. Because
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4) Immediate Cash Dividend plus a Large Stock Dividend
Leading to almost the same result, the immediate cash dividend together with a large stock dividend is not as recommendable as the third proposal is. Stock dividends are not efficient when one is trying to reduce the share price. They are normally used to maintain the price of a share or to slightly lower it. So in the case of Georgia Atlantic a stock split might be better than a stock dividend to cut the share price. 5) Cash Dividend, Stock Split, and Periodic Stock Dividends
Since Georgia Atlantic is a value-firm, it should really consider paying out a regular cash dividend to its shareholders. Furthermore a stock split would lower the share price and thus makes it possible for more investors to buy a round lot of Georgia Atlantic’s shares. In addition to that, a regular stock dividend assures a rather stable share price. 6) Share Repurchase Plan
This plan would enable Georgia Atlantic to react very flexible to the needs of certain shareholders. Furthermore the capital outlay for the firm is reduced due to the fact that no dividends have to be paid out and no transaction costs for stock dividends occur. Most shareholders would also prefer to hold their shares and not to resell them to the company. Although this plan definitely has some major advantages, it also has some disadvantages. Those investors

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