Explore BrainMass

Dividend Yield

The dividend yield is calculated by taking the annual dividend (the amount of ordinary dividends paid out over the year, or the last dividend payment annualized) and dividing by the market price of the share. This informs investors how much cash return each year they can expect to receive as a percentage of their initial investment.

Like the P/E ratio, the dividend yield is related to the future growth potential of the firm. This is for two reasons. For one, investors will pay more for a stock today with higher future growth potential then one without growth. This will make the market price per share inflated when compared with earnings – giving the stock a higher price to earnings ratio. Because dividends are paid out of earnings, if the price per share is inflated relative to earnings, it is likely to be inflated relative to dividends as well.

Similarly, investors often do not want high growth firms to pay dividends. If the firm can reinvest retained earnings into high growth projects, investors would prefer that the corporation keep more retained earnings, contributing to higher future growth. 

Company market ratio comparrison

Choose an industry and find four companies in that industry. Using a financial internet database such as, calculate or locate four market ratios: earnings per common share, price to earnings ratio, dividend payout ratio and dividend yield. Write an analysis comparing the market ratios of the four companies.

Cranberry Corporation: Projected net income

See attached file for proper format. Cranberry Corporation Income Statement ($ in millions) Sales $300 Costs 250 EBT $ 50 Taxes (34%) 17 Net income $ 33 Retained earnings $ 22 Dividends $ 11 Cranberry Corporation Balance Sheet ($ in millions) Cash $5

Parsons, Inc. Balance Sheet Problems

Parsons, Inc. is a publicly owned company. The following information is excerpted from a recent balance sheet. Dollar amounts (except for per share amounts) are stated in thousands. Stockholders equity: Convertible $17.20 preferred stock, $250 par value, 1,000,000 shares authorized; 345,000 shares issued and outstandin

Dividend Yield and Capital Gains Expected in the First Year

The club auto parts company has recently organized. It is expected to experience no growth for the next 2 years as it identifies its market and acquires its inventory. However, club will grow at an annual rate of 5 percent in the third year and beginning with the fourth year, should attain a 10 percent growth rate which will sus

Bonds and Stocks

1. Rick bought a bond when it was issued by Macroflex Corporation 14 years ago. The bond, which has a $1,000 face value and coupon rate equal to 10 percent, matures in six years. Interest is paid every six months; the next interest payment is scheduled for six months from today. If the yield on similar-risk investments is 14 pe

Financial Analysis

Please see the attached file. Sam Strother and Shawna Tibbs are senior vice presidents of Mutual of Seattle. They are co- directors of the companys pension fund management division, with Strother having responsibility for fixed income securities (primarily bonds) and Tibbs responsible for equity investments. A major new clien

Constant growth valuation formula for stocks

You are given the following information about three stocks: Chapman Tech is expected to pay a $ 1.20 dividend at the end of the year. The required return on Chapman Tech's stock is 11% and its dividend is expected to grow at a constant rate of 7% per year. Rust Petroleum is expected to pay a $ 1.50 dividend a

Microsoft's One Time Dividend

"Finally, in July 2004 Microsoft announced a plan to return cash to stockholders, by paying a special one-time $32 billion dividend in December 2004 . . . . Microsoft also doubled its regular annual dividend to $3.50 per share. Further, it announced that it would spend another $30 billion over the next four years buying treasury

Earnings per share, dividend payout & price-earning ratio, etc.

Financial statements for Praeger Company appear below: Praeger Company Statement of Financial Position December 31, 19X6 and 19X5 (dollars in thousands) 19X6 19X5 Current assets: Cash and marketable securities $100 $100 Accounts receivable, net 170 170 Inventory 110 110 Prepaid

Financial solution

One year ago, you bought 500 shares of Webster, Inc., stock at $37 per share. You just received a dividend of $1,000 and Webster stock now sells for $38. a. How much did you earn in capital gains? b. What was your total dollar return? c. What was your percen

If you require a 13 percent return on your investment, how much will you pay for the company's stock today? If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?

1). Stock values: Warren Corporation will pay a $3.60 per share dividend next year. The company pledges to increase its dividend by 4.5 percent per year indefinitely. If you require a 13 percent return on your investment, how much will you pay for the company's stock today? 2). Stock Valuation: suppose you that a company's st

Cash Flow Statement disclosures, compute dividend yield, sales trend percent

A company purchased equipment for $150,000 by paying $50,000 and signing a $100,000 note payable. The entire transaction is disclosed to users on the statement of cash flows and/or in its notes a. true b. false A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that invento

Howe Company: Dividend contraints and effects on stockholers' equity

The Howe Company's stockholders' equity account is attached. The earning available for common stckholders from the period's operation are $100,000, which have been included as part of the $1.9 million retained earnings. a) what is the maximum dividend per share that the firm can pay? (Assume that legal capital include all

Hastings company problem

Please help with the following problem. Provide step by step calculations. Hastings company's current dividend is $2 per share (D0=$2). The dividend is expected to grow at a constant rate of 9 percent a year for the next 2 years (t=1 and t=2) and it will be 4 percent thereafter (from t=3 to t=infinity). The risk-free rate is

Value of Shares & Capital Gains/Dividend Yields

ABC Corp is expected to pay a dividend next year of 1.75 per share. Yearly profits for ABC Corp are expected to grow at a rate of 15% for the following 2 years (after next year) and then at 2% per year indefinitely. Because the company has stated that it will maintain its current dividend policy, dividends are expected to grow a

Dividend yield, capital gains yield of stocks

Consider four different stocks,all of which have a required return of 18 percent and a most recent dividend of $4.50 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 10 percent, 0 percent, and -5 percent per year, respectively. Stock Z is a growth stock that

The DDM Corporation has just paid a cash dividend

1. The DDM Corporation has just paid a cash dividend (D0) of $2 per share. It has consistently increased its cash dividends in the past by 5% per year, and you expect it to continue to do so. You estimate that the market capitalization rate for this stock should be 13% per year. a. What is your estimate of the intrinsic value

Calculate dividend, stock price, dividend yield and capital gains rate.

ABC and Co has come out with an new product, and the world is beating a path to its door. As a result, the firm projects growth of 20 percent per year for four years. By then, other firms will have copycat technology, competition will drive down profit margins, and the sustainable growth rate will fall to 5 percent and remain at

Dividend Policies

Company Y's earnings have been predicted for the next 5 years and are listed below. There are 1 million shares outstanding, determine the yearly dividend per share to be paid if the following policies are enacted? Question 1: constant dividend payout ratio of 40 percent Question 2: stable dollar dividend targeted at 40 perc

Stock Valuation

1) You are offered 2 stocks. The beta of A is 1.4 while the beta of B is 0.8. The growth rates of earnings and dividends are 10% and 5, respectively. The dividends yields are 5% and 7 %, respectively. a) Since A offers higher potential growth, should it be purchased? b) Since B offers a higher dividend yield, should it b

Percentage Return/Dividend Yield

One year ago Mr. Seth invested $10,400 in 200 shares of stock and just received a dividend of $600. Today, he sold the 200 shares at $54.25 per share. a. What is Seth's percentage return? b What is the stock's dividend yield?

University of Tucumcari (UOT)

Building on your experience in the world of education, you are considering buying a for-profit educational institution, University of Tucumcari (UOT). UOT had earnings of $4.00 per share (at time 0) with a retention ratio of 40%. It has been facing more competition in recent years and anticipates that its growth rate for earni

Share of stock

Shares of my company sells for $20 per share. 40% of earnings are paid in dividends. What is the dividend yield? Earnings are $100,000 and there are 10,000 shares of stock outstanding. Explain?

After Tax Yield and Tax Liability

1. An investor recently purchased a corporate bond which yields 9 percent. The investor is in the 36 percent combined federal and state tax bracket. What is the bond's after-tax yield? 2. Corporate bond issued by Johnson Corporation currently yield 8 percent. Municipal bonds of equal risk currently yield 6 percent. At what ta


I need help with this problem. I know the answer but I don't see how they got it. a) A company plans to increase its dividend at a rate of 5% per year indefinitely, what will be the dividend per share in 10 years? $6.52 b) If the dividend per share is expected to be $5.87 per share at the end of 5 years at what annual rate

Ratio Analysis for Foggy Ltd and Compo Ltd

Given the attached tables and information on the Foggy Ltd and Compo Ltd companies, complete the following ... (a) Prepare an extract of the Profit and Loss Account for the year ended 31 March 2003 commencing with the operations profits for: i) Foggy Ltd. ii) Compo Ltd. (b) Calculate the following for each company: i) In