Dividend policy's impact on capital returns.

LAWCOMM 755 Corporate Finance

Task

Case Study Instructions:

This is an individual assessment item. This task should take no more than 4-5 hours to complete, if you are spending more time please see me for advice. Refer to Blackboard for further details.

Formatting Requirements:

Reports need to be 1.15 line spacing and 11 point Times New Roman font. Appendices may be included, however, anything contained in the appendices will not be marked - material in the appendices is considered additional for the purpose of clarity.

You will produce a report of no more than 500 words which will address the issues below:

In the Task 2 folder (Blackboard), you will find list of appropriate companies from the NZX. You are required to select One company from the list, each student must select a different company (you must email me with your choice for approval).

For your company, you are required to collect the following information from Bloomberg (or similar database):

The company’s dividend pay-out policy for the past 5 years (note, companies consider dividends in different ways, some use the pay-out ratio, others use different metrics). Identify the way the company considers its dividend policy and use that metric.

Information on any other capital returns to shareholders including (but not limited to) special dividends and share buy back offers.

Consider the company’s current dividend yield (dividend per share/price per share).

Collect & average the same information for four ‘peer’ firms based on the list available in Bloomberg (or similar database). Specifically, you should pick the four closest companies.

Present points 1-5 in a table.

Your report should address the following issues:

Does the company appear to have a stable dividend pay-out policy?

Does the pay-out policy match with any stated dividend policy that the company has?

Has the company used any other methods of returning capital? If so, what where the details of that issue and why did they choose to do it?

How does the company’s dividend yield and pay-out policy compare with its peers?

What might be driving any similarities or differences you observe?

Is the company’s dividend pay-out policy appropriate, in your opinion?

Consider differences from peers, how effectively the company is using its retained earnings and any other factors you deem relevant to justify your decision?

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