Reference no: EM131673175

Assignment

The word limit is 2,000 words maximum. Pick a growth stock and a mature firm from stocks on the ASX (Australia) and make sure they pay dividend. Clearly and concisely address the following (5marks each):

1. Explain and justify the criteria that you used to identify the growth stock and the mature firm.

2. For the last five years present a table showing the dividend yields for the two stocks for each year. Compare the dividend yields between the two firms and explain why they are very similar, or why they differ.

3. Pick one of your dividend paying stocks and using data for the last two years construct a table to answer
the following questions:

a. How frequently does the company pay a regular dividend?
b. What is the amount of the dividend?
c. By what date must your share be registered with the company in order foryou to receive the dividend?
d. How many weeks later is the dividend paid?
e. Work out the dividend payout ratio and explain your calculations.

4. To what extent is the dividend franked?

(a) Explain what franking means
(b) Compute the dividend yield adjusted for franking and explain your calculations
(c) Provide an estimate of next year's dividend and justify that estimate
d) Provide an estimate of the level of franking for next year and justify that estimate.

5. Pick one of your dividend paying stocks and using data for the last two years examine the ex-dividend price movements. How big was the price change relative to the dividend? Assume that the capital gains tax rate is 50% of the income tax rate and estimate the marginal income tax rate according to the Elton and Gruber model modified for imputation. Critically analyse your estimate.

6. Pick one of your dividend paying stocks and using data for the last two years report the price movement at the time of the dividend announcements. How do you interpret these price movements?