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Dividend Policy

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ABC Corp. has had the indicated earnings per share (EPS) over the last 3 years:

Year EPS
2003 $3.00
2004 $2.00
2005 $1.00

a) If the company's dividend policy was based on a constant payout ratio of 50%, determine the annual dividend for each year.

b) If the firm's dividend policy was based on a fixed dollar payout policy of 50 cents per share plus an extra dividend equal to 75% of earnings per share above $1.00, determine the annual dividend for each year.

c) Show all work.

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Solution Summary

The solution explains how to calculate the dividend amount under constant payout and fixed dollar payout

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