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Compare and contrast each of the dividend policies described

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Alternative dividend policies Given the earnings per share over the period 2005-2012 shown in the following table, determine the annual dividend per share under each of the policies set forth in parts a through d.

Year

Earnings per share

2012

$1.40

2011

1.56

2010

1.20

2009

-0.85

2008

1.05

2007

0.60

2006

1.00

2005

0.44

a. Pay out 50% of earnings in all years with positive earnings.

b. Pay $0.50 per share and increase to $0.60 per share whenever earnings per share rise above $0.90 per share for two consecutive years.

c. Pay $0.50 per share except when earnings exceed $1.00 per share, in which case pay an extra dividend of 60% of earnings above $1.00 per share.

d. Combine the policies described in parts b and c. When the dividend is raised (in part b), raise the excess dividend base (in part c) from $1.00 to $1.10 per share.

e. Compare and contrast each of the dividend policies described in parts a through d.

Reference no: EM13860466

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