What Is The Relationship Between Dividend Pay Out Ratio?

The main objective of the paper is to analyse last five years financial statements of two non-financial companies that are listed in London Stock Exchange (LSE). These companies are Tesco Plc. (TSCO) and Sainsbury Plc. (SBRY). This paper will discuss the profitability of these two companies and its impact on investor performance indicators. Moreover, the paper will analyse the financial statements of these company and will also calculate the financial ratios for these companies. In the end, the paper will suggest that which company has better performance by assessing the ratios.

In 2009 the company ratio was 1.02 and climbed up to 1.03. This means that the company will take up their profits in future of which is a good sign.

The capital structure of a company changes the risks exposure highlighting the need to determine the impact of debt levels on financial risk (Pearson Learning, 2014). The dividend payout is the ratio of dividends per share to the earnings per share, and both ratios increased for the three years. The increase in the DPS rose at a decreasing rate resulting in slower growth in the dividend payout. The dividend per share is dependent on the total number of dividends paid out in an interim year, and the increase in the DPS was in line with the management’s efforts to reward the investors as the earnings improved. The dividend yield representing the dividend paid out relative to the share price, and the lower divided yield in December 2014 can be attributed to the higher share price hovering over $40, which was more than double the share price in the previous

In 2014, the rate of inflation was at an all-time low since 2009 of 1.2% (BBC News, 2014), MW’s revenue increase for that year was 1.36% showing that they remained operating healthily. I have worked out that the number of basic shares for 2014 was 65,192,592 and the total dividends were 10,430,814. With their large amount of shares, MW could be liable to depending on shareholders making decisions about their business. According to The London Stock Exchange (2015), the return on investment in a stock from dividend yield is 3.82% for the fiscal year. This is quite a low return, which may suggest that the share is overpriced or that the dividends are likely to be higher in the future. Return on Equity was 18.3% ((23887000/90969000)*100) in 2014, shareholders earned 18% of their investment in the company back, showing an attractive level of investment quality. The Dividend cover is close to risky at 1.68 (0.27/0.16), the company can just about afford the dividends and the dividend pay-out ratio is low at 0.59(0.16/0.27), but has been stable indicating a solid dividend policy from the company. The cash dividend cover is also low at 1.74 (0.27/1.687).

As observed in the graphical representation, there is definitely a clear difference in the value of Debt-to-Equit ratio for Aveva inc as compared to that of Drax plc. The financial performance for Aveva as can be seen on the figure above show a consistent results in every single year, with only FY 2014-205 showing a little rise which can be attributed to the uncertainties in stock markets as a result to slowdown that was experienced in China and the Asian countries. Drax Plc has had a rise in its DE ratio continuously.

There has been a great deal of uncertainty about world economic growth and stock markets have been extremely volatile resulting low returns. However the firm’s ordinary shares have made good progress during the year. Ordinary share dividends have achieved substantial growth over the last two years although this rate of increase is not expected to continue. Ordinary dividends have grown at an average rate of 14% per annum over the past 10 years and this rate is a more realistic growth rate for future dividends.

Reviewing the performance of the Berkshire Hathaway in last three months, I target to analyze the recent performance with these dimensions: dividend policy, WACC, stock price, SWOT, and ratios. Moreover, I pay attention to and relate the recent performance of the case company to the aspects listed above.

Dividend payout defines the amount of dividend which is paid to shareholder in relation to the total net income of the business organization. We will take a look upon the dividend payout ratio of Walmart. According to accounting course.com “Investors are particularly interested in the dividend payout ratio because they want to know if companies are paying out a reasonable portion of net income to investors. For instance, most startup companies and tech companies rarely give dividends at all”. This paper analyzes Walmart Dividend payout, dividend yield, and dividend per share for the past three years; it will also discuss their performance in reference to other industries

Dividend payout ratio refers to the amount of earnings of a particular company that seeks to issue out to its investors in the form of cash dividends. Dividends payouts may vary depending on the industry and a low dividend payout may signify a good thing or a bad thing. Investors who may opt for a low dividend payout may mean that they are willing to allow the company plough back its annual earnings for the purpose of capital growth of the company they have invested in as well as capital gains incur lower tax rates. It may show that the investors are willing to forgo part of their dividends to generate greater returns which lead to higher stock market prices (Sedzro 2010). On the bad side, it may mean that the company does not have enough capital to pay dividends to its investors. The relationship between dividend payout and cash flow is that a company that pays higher dividends may seem to be having a greater cash flow to meet its daily operational needs but a company paying low dividend payout may seem to be having a low cash flow hence, the company needs to retain the dividends for operational needs. This therefore, translates to an increase in cash flow and a decrease in dividend payout when using low dividend payout (Sedzro 2010).

This report consists of detail ratio analysis of the financial statement of two companies stated above over a two year period (2008 through 2009) by performing and interpreting financial ratios from the data given. A brief comparison of the two companies’ performance in specific key ratios will also be discussed in this report. So in the end of the report, clear and detailed factors

The computation of a company's price to earnings ratio is yet another technique utilized by those interested in investing in stocks. The price to earnings ratio according to Porter and Norton (2010) can be taken to be "the relationship

Dividend policy is the decision for the firm to pay out earnings verses retaining and reinvesting them. Dividend decision has remained one of the tough challenges for financial economists. We are yet to understand completely the factors that influence dividend decision and the manner in which these factors interact.

At the end of the financial or business year of all companies, the company management prepares and publishes their financial statements and makes them available for their shareholders and other stakeholders. This is done so that the shareholders and all other stakeholders are aware of the financial condition of the company and how it is operating in terms of financial and operational success. All these people require being aware of all this information because it is the primary source of data that helps a stakeholder understand the existing and expected future condition of the company in terms of finances. When this information is obtained, the stakeholders are able to judge this information to determine any decisions that are to be made in order to improve and grow their investments in the company (Mustakallio, Autio, & Zahra, 2002). If a company is not in a sound position, which is witnessed through the operations of the company elaborated in the financial statements published by the company, the investors show reluctance to invest their money in such a company on which return is very low and risk of losing the money is high.

Thus the relation between dividends and share value is not precise and finance managers must clearly understand the various factors impacting the dividend policy when deciding how to allocate a firm’s earnings.

Purpose – The purpose of this paper is to examine the Dickens et al. model of bank holding company dividend policy. They identified five explanatory factors in a sample of bank holding companies (BHCs). Banking companies typically pay larger dividends and more often than industrial firms. Investors often look at the dividends as being important return variables. Design/methodology/approach – In this study, a sample of 99 firms with 2006 data