Fpl Case

When a company decides to pay dividends, it has to be careful on how much it will be given to the shareholders. It is of no use to pay shareholders dividends

From the recent case data, ExxonMobil has not acted irresponsibility in pricing its gasoline products. Outside of the grocery industry, I have not heard of any business segments surviving on less than a 5% profit margin. In reading that ExxonMobil reported only a net profit of 8.5%3, it is difficult to state that the firm over priced its products to reap abnormal profits. Although Mr. Lee Raymond’s $400 million retirement seems grossly out of proportion in utilitarian terms, adding these funds back into the firm’s bottom line would not change the profit results. With profit margins of less than 10%, it is unlikely that ExxonMobil would be able to keep the price of gasoline fixed if sweet crude oil were to increase from $80 per barrel to $88. This 10% increase in raw material cost would have to be passed through to the customer in the form of higher prices for the firm to survive.

Not only would this benefit the company, but would also benefit the stakeholders who just received the additional 50% stock dividend that CPK issued.

Dividend Policy | -Pay out dividend to shareholders in profitable period | -100% plowback to reinvest in the business |

FUTRONICS Inc. is a private company located in Lexington mainly categorized for modems, monitors, disk drives and terminals. It is moreover in to sales and services. This case is about the replacement of Futronics’s central office stores by an outside service provider. In this case supply management manager have an opportunity for investigating selected outsourcing in-house services.

A high dividend payout policy reduces the rate of growth in earnings, g = br. For any rate of return on investment (r), the larger the payout ratio (the smaller the value of b), the slower the rate of growth. Lumber firms in general (Georgia Atlantic is an exception) have approximately a 35 percent payout ratio. Since the other companies have, on average, been growing at a rate of about 7 percent annually over the last twenty years, versus an average growth rate of 2.47 percent for Georgia Atlantic, it is clear that Georgia Atlantic's ROE on investment is substantially below the industry average.

Investors often look at utility companies for their high dividend yields and growth over time. Although a high dividend is something sought by investors in utility companies, a high payout ratio can represent a negative signal. The high FPL’s payout ratio gives the company little room for error; if earnings would be adversely impacted in the future the company would be faced with the possibility of not being able to pay the dividend.

By cutting dividends, FPL can react better to future threats. After an initial panic selling triggered by the news shock (FPL never cut its dividend in the past 47 years), investors will process the new information realized that the dividend cut is balanced by an increased growth rate in the future. To justify the HOLD recommendation on the

Problem: On May 5, 1994 the utilities analyst of Merrill Lynch downgraded FPL Group Inc. due to an expectation of adjustment in dividend payments. The report also acknowledged the probability of a cut in the dividend. Kate Stark of First Equity Securities Corporation analyzes the situation and she has to predict what is going to happen. This investment alert was published dropped the stock price by 6% on the same day. 3 weeks ago Kate Stark has recommended a “hold” position for FPL Group. With the new report should she change her recommendation?

Based on the financing needs, as above dividends would be additional stretch on company finances

While conducting the analysis of EMI group’s dividend policy, one factor that stood out to us was the clientele effect. The clientele effect shows us who holds most of our outstanding shares. High tax-bracket individuals would prefer zero-to-low dividend payout to save on taxes. Low tax-bracket individuals would prefer a low-to-medium dividend payout, which gives them additional income while helping them save on taxes. An investing corporation would prefer a higher dividend payout because if they own a significant amount of shares, say 1 million, the income stream from that dividend would provide the company with more monetary resources while benefitting from tax exemptions. So before setting a dividend policy for EMI group, we must first

Using G-STIC framework identify goals, strategy (target market(s) and value proposition), 5Cs+3Vs, and tactics for the First Class Trading (FCT).

Paying dividends will reduce the available funds of the company but is a way to increase shareholder value. Increasing or decreasing of DPR spells out the standing of the company to its shareholders. Reduction or not giving dividends for a period will reduce AFN but will mean that the company is struggling to provide enough profit. Shareholders may see this as a signal that further investments for the company are riskier.

FPL has a very high dividend payout ratio of around 90% and has a 47 year streak of dividend increases. FPL’s dividend payout ratio is

The dividend policy has grown over the years. This may be so that the company projects itself as a less risky share and thus also gaining investors faith. The investors buy its shares and thus increase its demand. This helps to gives positive signals to the investors signalling that the company is stable and can generate earnings steadily. This hypothesis is gains standing from the dividend hypothesis theory.