a framework for analyzing dividends objective to determine wheth

Project Description:

a framework for analyzing dividends _br_objective _br_to determine whether your firm should change its dividend policy based on an analysis of its investment opportunities and comparable firms. _br_key questions _br_• how much could this firm have returned to its stockholders over the past few years? how much did it actually return? _br_• given this dividend policy and the current cash balance of this firm, would you push the firm to change its dividend policy (return more or less cash to its owners)? _br_• how does this firm’s dividend policy compare to those of its peer group and to the rest of the market?_br__br_framework for analysis _br_1. cash return to stockholders _br_• how much has the firm paid out in dividends each year for the past few years? _br_• how much stock has it bought back each year for the past few years? _br_• cumulatively, how much cash has been returned to stockholders each year for the past few years?_br__br_2. affordable dividends _br_• what was the fcfe that this firm had over the last few years? _br_• what is the current cash balance for this firm?_br__br_3. management trust _br_• how well have the managers of the firm picked investments, historically? (look at the investment return section.) _br_• is there any reason to believe that future investments of this firm will be different from the historical record?_br__br_4. changing dividend policy _br_• given the relationship between dividends and fcfe and the trust you have in the management of this firm, would you change this firm’s dividend policy?_br__br_5. comparing to sector and market _br_• relative to the sector to which this firm belongs, does it pay too much or too little in dividends? (do a regression, if necessary.) _br_• relative to the rest of the firms in the market, does it pay too much or too little in dividends? (use the market regression, if necessary.) _br__br_getting information on analyzing dividend policy _br_you can get the information that you need to estimate fcfe and returns on equity from past financials. you will also need a beta (see risk and return section) and a debt ratio (see risk and return section) to estimate the free cash flows to equity. finally, you will need stock returns for your stock and the returns on a market index over the period of your analysis. _br__br_
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