Assignment

On
Dividend Policy of British American Tobacco

Course Title: Managerial Finance

Course Code: FIN 435
Section- 02

Prepared For:

Dr. Tanbir Ahmed Chowdhury

Professor
Department of Business Administration

Prepared By:

Md. Habib Ahmed

2018-1-10-133

Date of Submission: 13th September 2020

1.0 Introduction
1.1 Company Overview
The presence of British American Tobacco in this part of the world can be traced back to 1910 as
Imperial Tobacco. The Company set up its first sales depot at Armanitola of Dhaka today. After
the partition of India in 1947, Pakistan Tobacco Company was established in 1949. The first
factory in Bangladesh (the then East Pakistan) was set up in 1949 at Fauzdarhat in Chittagong. It
became Bangladesh Tobacco Company Limited in 1972 immediately after Bangladesh's
independence. In 1998, the Company changed its name and identity to British American Tobacco
Bangladesh (BAT Bangladesh) aligning the corporate identity with other operating companies in
the British American Tobacco Group. BAT Bangladesh is a part of BAT plc, the renowned
international tobacco group, with brands sold in 180 markets around the world. They make high
quality tobacco products for the diverse preferences of consumers, spanning the business 'from
crop to consumer', and they are committed to embedding the principles of corporate social
responsibility Group wide. They were among the first companies to be listed on the Dhaka and
Chittagong Stock Exchanges and currently rank amongst the top 10 companies in terms of market
capitalization.

BAT Bangladesh strive to be a responsible company wherever they operate - that may be to their
shareholders, employees, business partners or any other relevant internal and external
stakeholder. To them, responsibility is a way of life and that is why they believe ‘success and
responsibility go together’.

They harness diversity - of their people, cultures, viewpoints, brands, markets and ideas - to
strengthen their business. They are forward looking and anticipate consumer needs, winning with
innovative, high quality products. They are open to new ways of doing things.
1.2 Objective
Appraisal of dividend policy

1.3 Scope and Methodology

My assignment is basically based on secondary data. I have used the websites of Dhaka Stock
Exchange (DSE) and BAT to obtain data. I have extracted the financial figures from annual reports of
BAT of 5 years starting from 2014 to 2018.

1.4 Limitation
 Lack of expertise.
 Due to the pandemic situation, there was the lacking of physical guidance which could have
further enhanced the quality of the assignment.
 Limited to only secondary source of information.
 Since it is an individual assignment, there may be lacking in some parts.
2.0 Appraisal of Dividend Policy
2014 2015 2016 2017 2018
Authorized Capital 600,000,00 600,000,000 600,000,00 600,000,00 600,000,000
(BDT) 0 0 0
Paid-up Capital 600,000,00 600,000,000 600,000,00 600,000,00 600,000,000
(BDT) 0 0 0
Retained Earnings 10,798,615 13,944,623 18,217,686 22,447,542 28,863,958
(BDT ‘000s)
Earnings per share 104.70 97.43 126.37 130.50 166.87
(BDT)
Cash Dividend 55 55 60 60 50
(BDT/share)
Stock Dividend N/A N/A N/A N/A 1:2
Net Income (BDT 6,281,922 5,846,008 7,573,063 7,829,856 10,016,416
‘000s)
Face Value (BDT) 10 10 10 10 10
Market Value (BDT) N/A N/A N/A N/A 1,082.30
52 weeks price range 2,818-1,595 N/A 3,083-2,403 3,520-2,430 3,785-3,196
(BDT)
Dividend pay-out 52.53 56.45 47.47 47 30
ratio (%)

From the above data, it can be deduced that BATBC follows a low-regular-and-extra-dividend-
policy. Cash dividends paid per share is almost half of those earnings per share for which
dividend payout ratio is also around 50%. For the years of 2014 and 2015, BDT 55 was given per
share as cash dividend. But when earnings increase in 2016 and 2017, cash dividend was
increased to BDT 60. However, for the year of 2018, when earnings were relatively higher cash
dividend per share was comparatively but the company paid stock dividends in the ratio 1:2 as
bonus. This shows that the company gives it shareholders the stable income necessary to keep
confidence in the management and the bonus dividend permits them to share in the earnings from
an especially good period.
3.0 Findings

 Retained Earnings

It can be seen that the company retains quite a handsome amount of money almost half of the
net income. Also, the retained earnings had been in an increasing mode for the 5 years. This
is a positive thing for the company as it has enough retained earnings for reinvestment and to
meet its capital expenditures. The company will not need to raise new capital or take loans for
new projects.

 Furthermore, the company follows relevance theory of dividend policy and pays regular
dividend which reassures the shareholders that their money is not being wasted. Moreover, it
also indicates that agency problems are low.
 Earnings per share

The increasing trend of earnings per share sends a good signal to the shareholders that the
company is doing well to ensure their best interest i.e. maximization of wealth.

 In the year of 2018, when earnings were quite high, the firm retains it in a very well manner.
It pays less amount of cash dividend but substituting it with stock dividends. In this way, it
satisfies the shareholders by increasing their number of shares while retaining the income.
4.0 References
https://www.dsebd.org/displayCompany.php?name=BATBC
http://www.batbangladesh.com/group/sites/BAT_9T5FQ2.nsf/vwPagesWebLive/DOA53FZC?
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