Home Depot, Inc.'s income statements for 2013, 2014, and 2015 show basic earnings per share of $3.78, $4.74, and $5.49, respectively. Diluted earnings per share figures are slightly lower than these numbers, indicating the impact of potential capital stock activity that could reduce earnings per share for current stockholders.
The company paid cash dividends of $1.56 per share in 2013, $1.88 per share in 2014, and $2.36 per share in 2015.
a. Why do you think Home Depot is paying out only about 40 percent of its net income to stockholders in the form of cash dividends?
b. If you were an investor in Home Depot's stock, would you be unhappy because your dividends represented about 40% of the company's net income?