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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions.

In this chapter's opening vignette, we discussed Apple's decision to establish a dividend payout policy in 2012 and its subsequent decisions to increase quarterly dividends and raise its repurchase program to $175 billion. Let's find out what has happened to Apple's (AAPL) dividend policy since the time of its original announcement. We can address this issue by relying on data provided on internet financial websites such as Yahoo! Finance, Morningstar.com, Google Finance, and MSN Money (www.msn.com/en-us/money/markets). You will have to use a combination of these sites to answer these questions.

5. Investors are more concerned with future dividends than historical dividends. Look at analysts' earnings estimates for the next year and the 5-year annual growth estimates. On the basis of these data, what would you expect Apple’s payout policy to be over the next 5 years? (Your answer will only be a guess based on current data.)

Summary Introduction

To explain: The behavior of A Company’s payout policy in the future.

Payout ratio:

It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.

Explanation

Given information:

Table to show the data related to earnings and dividend of Company A,

ParticularsValue
Earnings per Share$10.22
Dividend per Share$2.40
Dividend Payout23.5%
Dividend Yield$1.42

Table (1)

Table to show the data related to earnings growth Company A,

Year20182019202020212022
Forecast Earnings Growth23.50%9.96%7.23%10.05%11.60%

Table (2)

The estimated annual growth rate in five years will be 11...

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