The Argo Pamphlet Companys dividend payout ratio is 35%. It is currently paying an annual dividend of

Question:

The Argo Pamphlet Company’s dividend payout ratio is 35%. It is currently paying an annual dividend of $1.30.

a. What is Argo’s EPS?

b. What is the market price of Argo’s stock if its P/E ratio is 14?

c. How much current income per share will stockholders lose if Argo cuts its payout ratio to 20% and nothing else changes?

d. If the change in payout ratio does not affect the stock’s price, approximately how many shares would a stockholder who owns 1,000 shares have to sell to make up her loss in current income? Ignore tax effects and transaction costs.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...