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The objective is to analyze and recommend changes if required, in the payout policy of the ten firms we used in the Cost of Capital Estimation assignment. Consider the following guidelines for this assignment.
You are required to do the following:
For each year, estimate how much cash (dividends + buybacks) has been returned to shareholders. Source: Mergent Online Database (accessible through UT Libraries)
Estimate how much cash could be returned to shareholders – The free cash flow to equity (FCFE) is a good proxy. Source: Mergent Online Database (accessible through UT Libraries)
Compare total payout (dividends + buybacks) and FCFE to determine whether the firm paid too much or too little dividends in that year.
Evaluate the performance of the firm/management using one or more of the following measures.
Compare Return on Assets (ROA) and Weighted Average Cost of Capital (WACC) and/or Compare Return on Equity (ROE) and Cost of Equity (Re)
Source for ROA and ROE: Mergent Online
Source of WACC and Re: Your results from the cost of capital estimation exercise
Submission: You are required to upload one Word document containing the following details
A Table that shows the relevant data for each company. You can use the format shown in the ′Assessing Dividend Policy Demonstration′ for this submission
One paragraph for each company addressing the following
Whether the firm is paying too much or too little dividends compared to how much it can actually payout.
A five-year trend, if any, with respect to the magnitude of dividends and buybacks
Based on this analysis, provide a recommendation on how the firm should alter its dividend policy.
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