Dividend Policy of Porsche

1396 WordsApr 23, 20066 Pages
Paying out dividends belongs to the easiest way to communicate financial well-being and shareholder value, since they are sending out a powerful message about future prospects and performances. The willingness, and also the ability of companies to pay out steady dividends and maybe even to increase them, provides the shareholder with valuable information about the company 's fundamentals. Wherever you are looking for information regarding dividends, you will find statements about their affection on stockholders. But where is the point for the companies? What drives companies to pay out dividends, and why do some companies do so and some do not? There is the opinion of some financial analysts that a dividend policy is irrelevant…show more content…
On top of this set dividend, there is always the possibility for these companies to offer another extra dividend, paid only when income exceeds generally obtained levels. In the following, we had a closer look at the German company "Porsche" and we tried to find some information about their dividend policy. As the following tables show, there was a steady increase of the paid dividend over the last years which reached a level of 3.34 Euros for the common stocks and of even 3.40 Euros for the preferred stocks in 2003: In order to find out whether Porsche is using the residual, stability or the hybrid method, we firstly started to examine whether the obviously most probable method, the stability growth policy applied. Therefore, we examined the yearly dividends but could not find any dependence. Now, we calculated the amount of shares necessary to distribute the whole net income under Porsche 's shareholders which led us to the following tables : For the reason that Porsche did not increase the number of shares in the last years and the dividend payout did not increase constantly, we concluded that Porsche is not using the stability dividend policy. Nevertheless, since Porsche 's dividend strategy is a rising one, we assumed that they are using a mixture of the residual and the stability policy, namely the hybrid strategy. Admittedly, we have to say that their dividends did not increase depending on the level of net income as the next

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