Georgia Atlantic Company Essay

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

The main purpose of the report is to make a decision for Linear Technology on dividend policy. The report analyzed the impact of changing future dividend policy on the value of the company, based on its historical performance, financial history and market trends.

In the final project, students will apply the knowledge gained in this course to a case example.

Since the emergence of the so-called irrelevance theorem by Miller and Modigliani (1961), many corporations are puzzled about why some firms pay dividends while others do not. They were the first to study the effect of dividend policy on the market value of firms by assuming that there are no market imperfections. Miller and Modigliani (1961) proposed that divided policy chosen by a firm has no significant relationship in as far as the market valuation of the firm is concerned. They went further to explain that; the shareholders wealth remains unchanged irrespective of how the firm distributes it income because the firms’ value is rather determined by their investment policies and the earning power of its assets. They further stated that the opportunity to earn abnormal returns in the market does not exist, that is, owners are entitled to the normal market returns adjusted for risk.

Generally, the report team have a well-presented PowerPoint presentation about their analysis of dividend policy at FPL group Inc. They have demonstrated the process of how they come up with these results briefly. They have also examined the company’s history, financial figures and some related industry information, and gave reasonable recommendations. The report team expected that the company would most likely to hold their currently dividend policy and suggested their clients to sell the company shares in short term.

The case is written in a style that overviews the situation but intentionally avoids guiding students through any analytical framework or specific application question. In so doing, it provides the instructor with the latitude to adjust class discussion and thereby accommodate the

We studied long term trends in stock earnings and dividends from 1871 to the present. We observed two distinct periods: 1) from 1871 to 1945 where the common dividend policy was to focus on high payout ratios; 2) after 1945 companies started managing the amount of dividends paid per share. In the latter period, companies were slow to increase dividends as earnings increased, effectively reducing the payout ratio and providing them with a cushion to maintain dividends when earnings dropped temporarily. As a result, the payout ratio dropped, hitting a historical low of 30% in 2011. Since then, companies

4) What results have empirical studies of the dividend theories produced? How does all this affect what we can tell managers about dividend payouts?

The factors that determined the dividend policy of firms were governed by the way firms could catch up from the crisis. The number of firms that resorted to dividend payout was dangerously low, but in 2011 the firms earnings having rebounded there have been nearly 1000 cases of increases and only 84 cases of decreases in firms which have started paying dividends . S&P 500 firms were seen to have paid approximately $200 billion in 2010 and the dividends to earnings pay out continues to remain very low .

Using the Case Method The case method brings reality into the classroom. When developed and presented effectively, with rich and interesting detail, cases keep conceptual discussions grounded in reality. The case method can help you develop your analytical and judgment skills. Case analysis also helps you learn how to ask the right questions. Students aspiring to be managers and business owners can improve their ability to identify underlying problems, rather than focusing on superficial symptoms, through development of the skills required to ask probing, yet appropriate, questions. The particular set of cases your instructor chooses to assign the class

“There are two main schools of thought in respect Dividend Policy: the Relevance Theories, and the Irrelevance Theories. Explain briefly"

According to the Constant payout ratio, a firm will pay a fixed dividend rate e.g. 40\% of earnings. The dividend per share would therefore fluctuate as the earnings per share changes. Dividends are directly dependent on the firm 's earnings ability and if no profits are made any dividends are paid. This policy creates uncertainty to ordinary shareholders, especially who rely on dividend income and might demand a higher required rate of return (Gitman, 1998).

Myron Gordon and John Lintner believe that the required return on equity increases as the dividend payout ratio is decreased. Their argument is based on the assumption that

Miller and Modigliani (1961) proposed the dividend irrelevance theory, suggesting that the wealth of the shareholders is not affected by the dividend policy. It is argued that the value of the firm is subjected to the firm’s earnings, which comes from company’s investment policy. The literature proposed that, the dividend does not affect the shareholders’ value in the world without taxes and market imperfections or perfect capital market. Further they argued that dividend and capital gain are two main ways that can contribute profits of the firm to the shareholders. When a firm chooses to distribute its profits as dividends to its shareholders, then the share price will be reduced automatically by the amount of a dividend per share on the ex-dividend date. So, they proposed that in a perfect market, dividend policy does not affect the shareholder’s return. The main assumptions

Taking into account the potential contribution these factors, is a strong motivation to examine the subject in detail because of its great impact on the market value of firm for which investors are greatly concerned. Therefore, this study will attempt to highlight the dividend policy of each industry in the UK and also try to employ the overall concept of dividend policy on share prices that are likely to affect shareholders return. For example (Salih, ALAA.A, 2010; Md. Zahangir Alam and Mohammed Edndad Hossain, 2012, Fawaz Khalid Al-Shawawreh, 2014).