Stock & Bond Investments: Chapter 7 Part 2 Assignment

For questions 1 - 3, please complete the following columns of the chart below: Earnings Per Share (EPS), Dividend Yield, and Payout Ratio. Calculations for each item are listed below.

Earnings Per Share (EPS): Share Price / Price to Earnings Ratio (P/E)

Dividend Yield: Annual Dividend Per Share / Share Price

Payout Ratio: Annual Dividend Per Share / Earnings Per Shares (EPS)

Ticker	Company	Share Price	Price to Earnings Ratio (P/E)	Annual Dividend Per Share	Earnings Per Share (EPS)	Dividend Yield	Payout Ratio
XEL	Xcel Energy	$26.05	13	$1.50
GXP	Great Plains Energy	$23.47	10	$1.66
NOR	Northwestern Corp.	$20.52	17	$1.27
MAP	Maine Public Service	$29.80	9	$1.40
CV	Central Vermont P/S	$18.90	31	$0.88
WPS	WPS Resources	$42.16	15	$2.10
LNT	Alliant Energy	$27.95	14	$2.00

Please use the chart above to answer questions 4 - 8.

4. What sector or industry do these stocks represent?

5. Why would you invest in these stocks?

6. What is this industry's average P/E ratio? Which stocks do you believe are underpriced? Which stocks do you believe are overpriced? (Use the information given to find the average P/E ratio.)

7. What observations would you make about these stocks?

8. Which stock would you consider for purchase?

9. Why is competition very important when analyzing companies in a specific industry?

10. Why do different industries trade at different price-to-earnings (P/E) ratios? Provide 2 examples.