Percentage of earnings retained

Assignment Help Management Theories

Reference no: EM131073512

a. 1. Percentage of Earnings Retained = Net income - all dividends / net income

2011

2010

2009

Net income (A)

Less:

Common dividends

Preferred dividends

(B)

(A) - (B) = (C)

$31,200,000

21,700,000

910,000

$22,610,000

8,590,000

27.53%

$30,600,000

19,500,000

910,000

$20,410,000

10,190,000

33.30%

$29,800,000

18,360,000

910,000

$19,270,000

10,530,000

35.34%

2. Price/Earnings Ratio = Market Price per Share

Fully Diluted Earnings per Share

2011

2010

2009

$12.80 $14.00 $16.30

$1.12 $1.20 $1.27

= 11.43 = 11.67 = 12.83

3. Dividend Payout = Dividends per Common Share

Fully Diluted Earnings per Share

2011

2010

2009

$0.90 $0.85 $0.82

$1.12 $1.20 $1.27

= 80.36% = 70.83% = 64.57%

4. Dividend Yield = Dividends per Common Share

Market Price per Common Share

2011

2010

2009

$0.90 $0.85 $0.82

$12.80 $14.00 $16.30

= 7.03% = 6.07% = 5.03%

Total Stockholders' Equity -

5. Book Value per Share = Preferred Stock Equity

Number of Common Shares Outstanding

2011

2010

2009

Total assets

Less:

Liabilities

Stockholders' equity

Less:

Nonredeemable preferred

stock

(A) Common stock equity

(B) Shares outstanding

end of year

(A) ÷ (B)

$1,280,100,000

(800,400,000)

479,700,000

(15,300,000)

$ 464,400,000

24,280,000

$19.13

$1,267,200,000

(808,500,000)

458,700,000

(15,300,000)

$ 443,400,000

23,100,000

$19.19

$1,260,400,000

(799,200,000)

461,200,000

(15,300,000)

$ 445,900,000

22,500,000

$19.82

b. The percentage of earnings retained is reduced. The related ratio, dividend payout, is hence increasing. The P/E ratio has been stable. The dividend yield has increased and is high. The Market price per share is below the book value. It seems that stock is purchased for high dividend and not for growth potential.

Reference no: EM131073512

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