Reference no: EM133105812
Question - You are considering purchasing some Stanley Ltd. common shares. Although Stanley recently had to incur significant expenditures for new capital assets, the company has been relatively profitable over the years and its future prospects look good. The summarized statement of financial position at the end of 2016 is as follows:
Cash $137,500
Other current assets 640,500
Capital assets (net) 4,702,000
Total $5,480,000
Current liabilities $414,000
Long-term debt 2,000,000
Share capital, common shares 1,000,000
Retained earnings 2,066,000
Total $5,480,000
The company has 150,000 common shares outstanding, and its earnings per share have increased by at least 10% in each of the last 10 years. In several recent years, earnings per share increased by more than 14%. Given the company's earnings and the amount of retained earnings, you judge that it could easily pay cash dividends of $3 or $4 per share, without reducing its retained earnings.
Required - Do you think it is likely you would receive a cash dividend from Stanley during the next year if you were to purchase its shares. Why?