Problem: Company Y's earnings have been predicted for the next 5 years and are listed below. There are 1 million shares outstanding, determine the yearly dividend per share to be paid if the following policies are enacted?
Question 1: constant dividend payout ratio of 40 percent
Question 2: stable dollar dividend targeted at 40 percent of the earnings over the 5 year period.
Question 3: Small regular dividend of $0.50 per share, plus a year-end extra when the profits in any year exceed $1,500,000. the year-end extra dividend will equal 50 percent of profits exceeding $1,500,000
Year profits after taxes
Year 1 1,500,000
Year 2 2,000,000
Year 3 1,750,000
Year 4 950,000
Year 5 2,500,000