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BBPW3203 FINANCIAL MANAGEMENT II
Name : Alexander Yang Yee Chuan @ Richard Matrix Number : 731102125021001 NRIC : 731101-12-5021 Telephone number : 013-8569072 E-mail address : firstname.lastname@example.org Learning Centre: Keningau
or they could pay out the profits to the owners of the firm in the form of dividends. Dividend policy may be explicitly stated. the same will be done in the future * Any other pattern of dividend growth will continue as long as the cover does not fall too low. This means that increasing the dividend is a way in which the management of a company can signal investors that they are confident. A company's dividend policy is the company's usual practice when deciding how big a dividend payment to make. Companies do not normally increase dividends unless they are confident that the increase is sustainable. What they decide depends on the situation of the company now and in the future. It also depends on the preferences of investors and potential investors. It may also include stock dividend or other forms of payment. Once the company decides on whether to pay dividends. A dividend is a usually distributed in cash form to stock holders of a corporation approved by the board of director.Overview of Dividend policy Once a company makes a profit. If a company states a dividend policy it usually takes the form of a target pay-out ratio. they must decide on what to do with those profits. which may in turn impact on investors and perceptions of the company in the financial markets. A stock dividend represents a distribution of additional shares to common . They could continue to retain the profits within the company. they may establish a somewhat permanent dividend policy. Assumptions that investors are likely to make are: * The DPS will be maintained at least the previous year's level (excluding special dividends) — unless dividend cover is very low or the company has warned that a dividend cut is possible * If the payout ratio has been maintained at a roughly constant level in the past. or investors may infer it from the dividend payments a company has made in the past. If a company has not stated a dividend policy then investors will infer it.
Canada. A payout ratio of more than 1 means the company is paying out more in dividends for the year than it earned. This ratio is apparently popular with analysts of income trusts in .stockholders. Dividends are only cash payments regularly made by corporations to their stockholders. Dividend cover is calculated by dividing the company's cash flow from operations by the dividend. There are two metrics which are commonly used to gauge the sustainability of a firm's dividend policy. Payout ratio is calculated by dividing the company's dividend by the earnings per share.
Miller and Scholes (1978).Literature Review The Relationship Between Dividend Policy and Value The question of whether dividend policy affects the value of the firm has puzzled researchers and corporate managers for many years. In practice.g. cash dividends announcements convey valuable information about management's assessment of a firm's future profitability that other means cannot fully communicate. researchers have different views about whether the percentage of earnings that a firm pays out in dividends materially affects its long-term share price. Jose and Stevens (1989)]. If managers have information that investors do not have. Yet. Sterk and Vandenberg (1990)]. Dividend policy is one of the most widely researched topics in finance. Thus. empirical evidence on whether dividend policy affects a firm's value offers contradictory advice to corporate managers. much empirical evidence supports the view of dividends as a signaling device. although paying dividends is costly in various ways. Miller and Modigliani (1961) realize that in the real world a change in the market price often follows a change in the dividend rate. most firms pay cash dividends. and Edelman (1985) shows that corporate managers typically believe that dividend policy affects a firm's value and that an optimal level of dividend payout exists. Several empirical studies provide support for the agency explanation for dividends. Today. According to the information content of dividends or signaling explanation. In addition.g. investors may use dividend announcements as information to assess a firm's stock price. Long (1978). survey research by Farrelly. On balance. managers may use a change in dividends as a way to signal this private information and thus reduce information asymmetry. many academicians and corporate managers still debate whether dividend policy matters. Information asymmetry suggests that corporate managers have an information advantage over outside investors. Another possible reason for paying dividends is the use of dividend policy to communicate information about a firm's future prospects to investors. Baker. For example. Black and Scholes (1974). In turn. others do not [e.. Some empirical studies appear to support Miller and Modigliani's (1961) classic dividend irrelevance proposition [e. Rozeff (1982) finds support for the role of dividends in resolving agency costs in minority-manager-controlled ..
Therefore. Crutchley and Hansen (1989) and Moh'd. Given a lower percentage of outsiders. (i. A dividend increase may signal good future earnings. Investors preferring to avoid taxes will be drawn to firms with lower payout ratios.e.firms. His analysis shows a negative relationship between dividend payout and the percentage of insiders. Information Content: Changes in dividend policy may be signals concerning the firm’s financial condition. given their stated dividend policy). A dividend decrease may signal poor future earnings. less need exists to pay dividends to reduce agency costs. and Rimbey (1995) conclude that managers make financial policy tradeoffs such as paying dividends to control agency costs. Perry. . firms draw a given clientele. firms should avoid making drastic changes in their dividend policy. Dividend policy issues Clientele Effect: Investors needing current income will be drawn to firms with high payout ratios..
the Company had a total of 43 RasaMas restaurants in Malaysia and Brunei and 35 Kedai Ayamas stores across Malaysia.Dividend History This Report provides Dividends history for KFC Holdings (Malaysia) Berhad. feed mills. .14 Dividend 0. the Company operates in three segments. Through its subsidiaries. Its ancillary support system encompasses sauce manufacturing. integrated poultry and ancillary. namely restaurants.14 Dividend * Close price adjusted for dividends and splits. 2010 Sep 9. In 2009.10 Dividend 0. and processing and further processing plants. the Company had acquired the entire issued and paid-up capital of Rasamas Terminal Larkin Sdn Bhd and Rasamas Melaka Sdn Bhd. 2008 Sep 13. As of December 31. 2010 May 4. Tabular results include up to a four-year history of dividend payout from 2007 to 2011. 2009. 77 stores in Singapore.08 Dividend 0. 2009.12 Dividend 0. 2009 Sep 17. KFC Holdings (Malaysia) Bhd is a Malaysia-based investment holding company. Tabular results include up to a four-year history of dividend payout from 2007 to 2011.08 Dividend 0. On December 15. contract broiler farming. Prices Date Sep 8.16 Dividend 0. 2008 May 5. KFC Holdings (Malaysia) Berhad . Gamuda Berhad – Dividend History This Report provides Dividends history for KFC Holdings (Malaysia) Berhad. 2007 Open Low Close Volume 2: 1 Stock Split 0. 2010 Sep 7. 2009 May 5. Its integrated poultry operations include breeder farms and hatchery.Dividend payment history of firms listed on the Bursa Malaysia 1. High Adj Close* 2. 2007 Jun 14. the Company operated 475 restaurants across Malaysia. poultry farms. nine restaurants in Brunei and 72 restaurants in India. as well as bakery and commissary operations.08 Dividend 0.
Republic of China. railway. The Company operates in Malaysia.23 Dividend 0. 2008 Jan 14. 2010 Jan 26.04 Dividend 0. Bhd. which is engaged in the development of residential and commercial properties and club operations. Prices Date Aug 4.125 Dividend 0. The full service carrier shrunk its operation to record its tenth consecutive quarterly net profit. Qatar. airfield facilities. Bahrain and Vietnam. Mauritius. 2010 Aug 4.23 Dividend * Close price adjusted for dividends and splits. High Low Adj Close* The sectors chosen:Aviation Sector AirAsia Versus Malaysia Airlines (1 Quarter 2008) Malaysia Airlines (MAS) and AirAsia released contrasting financial results for the fourth quarter and full year ended 31-Dec-08. 2009 Jan 13. Its subsidiaries include Gammau Construction Sdn. dams and general and trading services related to construction activities.04 Dividend 0. 2009 Jul 16. while the LCC continued its aggressive expansion.125 Dividend 0. which is engaged in the construction of highways and bridges. Bhd. water treatment plants. Taiwan. and water and expressway concessions. but notched . The Company operates in three business segments: engineering and construction. and Gamuda Engineering Sdn. property development and club operations. 2007 Open Close Volume 0.06 Dividend 0.06 Dividend 0. 2008 Jul 17. 2007 Apr 17. which is engaged in the management of water supply and the management and tolling of highway operations.Gamuda Berhad is a Malaysia-based investment holding company engaged in civil engineering construction.
MAS cut its capacity by 1. While MAS has been eking out small net profits. while AirAsia grew its ASKs by 17% (its slowest pace all year). which was outdone by AirAsia's 13% increase in RASK to MYR 16. Malaysia Airlines and AirAsia passenger numbers growth comparison: 1Q08 to 4Q08 MAS reported a 5% increase in RASK (including fuel surcharges and admin fees) to MYR 21. as it unwound its fuel hedging programme and some of its interest rate swaps. However.5 sen. AirAsia appears set to soar. Free of the hedging contracts that weighed down the second half of 2008. AirAsia lost heavily in the final two quarters of 2008. AirAsia's quarterly operating result was outstanding.up its second consecutive quarterly net loss.3% in 4Q08.75 sen. Malaysia Airlines and AirAsia passenger net profit margin comparison: 1Q08 to 4Q08 .
We believe this will ultimately yield the most beneficial returns when viewed on a long-term basis.4 million” . raising gross proceeds of RM505. The business is in the early stages of development and capital is required to be reinvested for the future’s well being. and AirAsia's margins exploded in the final quarter.But the core operating margins are a better guide of the relative strengths of the two businesses. AirAsia’s Dividend Policy AirAsia does not pay dividends nor do we foresee paying dividends in the near future. The carrier's fourth quarter operating profit of MYR194 million was three times higher than Malaysia Airlines' result for the same period and double AirAsia's result for the same time last year. Budget airline AirAsia Bhd said” it has successfully placed out 380 million new shares at RM1.33 per share. No dividend has been paid or declared by the Company since the end of the previous financial period. The Directors do not recommend the payment of any dividend for the financial year ended 31 December 2008.
STOCKCODE NAME 5099 AirAsia REF.380 HIGH 1.96 21’278’300 0. 1. Purchase of share Direct and Indirect 302’246’900 10.370 CHANGE -0.390 LOW 1.010 VOLUME(‘00) 18442 Changes in substantial shareholder’s interest : October 3 2009 Circumstances by reason of which Change has occurred Nature of interest Direct(units) Direct(%) Indirect/deemed interest (units) Indirect/deemed interest (%) : : : : : : Sale of equity.77 MAS’s Dividend Policies .370 LAST 1.
85% 53.4 203.5% Dec-03 259 24 283 2.6% Dec-01 374 681 992 2.4 0% 0% Dec-03 75.00% Affordable Dividend .4 0% 0% Dividend Paid Stock Buyback Total Cash to Shareholders Dividend Yield % Dividend Payout % Averages: Dividend Yield = 0.91% Dividend Payout = 41.00% Dividend Payout = 0.7 75.14% 57.2 0% 0% Dec-01 49.7 0% 0% Dec-00 203.44% 43.52% .08% 53.Free Cash Flow to Equity (FCFE) and Dividends/Stock Buybacks Company Campbell Average FCFE 560.3% Dividend Paid Stock Buyback Total Cash to Shareholders Dividend Yield % Dividend Payout % Averages: Dividend Yield = 2.60% 54.8% Dec-00 384 394 778 3.67 Ave.5% Dec-02 286 5 291 3.87 Dividend + buyback / FCFE 60.4 203.7 49. dividend and stocks buyback 531.34% 2) Starbucks Company Dec-04 203.Food and beverage Sector Campbell Soup versus Starbucks 1) Campbell Soup Company Dec-04 259 56 315 2.2 52.7 0% 0% Dec-02 52.80 difference 28.
It may be mentioned that it has a debt ratio of less than 10% while its optimal debt ratio is 40%. this company needs flexibility to invest in new projects and products that have an extremely high variability in terms of success or failure. Campbell Soup Dividend Yield (D/Y) % Average Industry Average D/Y Dividend Payout (D/P)* % Average Industry Average D/P 2. this company could afford to pay high dividends. either through dividends. or stock buybacks. and the projects it has undertaken have been within their core businesses.73% 43.5 76. the companies should be careful with its dividend policy so as to have cash available to continue investing in good projects. Starbucks need financial flexibility for future growth and therefore should ideally have a low financial leverage. Campbell Soup has utilized debt to pay higher dividends.Starbucks 152.21% 35. we compared the average FCFE for each company to the cash returned to stockholders (over the last 5 years).04% 11. or both.(Cap Ex – Depreciation)*(1-Debt Ratio) .Change in Working Capital * (1-Debt Ratio) Free Cash Flow to Equity (FCFE) As a second step.50% 20.88% Campbell Soups had high and fairly steady earnings. In that regard. Indeed. In fact. which has helped it increase its debt ratio.2 76. . Consequently.3 50% We determined the amount that our selected companies could have paid in dividends by first calculating the average Free Cash Flow to Equity (FCFE) for each company as follows: Net Income .44% 0.34% Starbucks 0% 0.
16. 1. 0.06.28%.6. 2004. 20. but rather by macroeconomic trends.0. 2005 Dividend per share 0. 162.0. Automobiles Sector Proton Berhad Investor Ratios There are several ratios commonly used by investors to assess the performance of a business as an investment: Year 2001. Stockholder expectations on the firms are driven by expectations of future growth from investments rather than by the dividend policies of the companies in this sector. 7.95% Dividend yield ratio------1.47 Price earnings(P/E) ratio------9. 0. Consequently. 0.88%. initiation of dividend payout can at times signal that the company no longer has good investment projects on its plate and hence future growth is expected to slow down. That may be taken as a negative signal by the stock markets.93%. 18.25 Dividend payout ratio10. 0.99% .3 Dividend per share: .6. 16.52.2% Earnings per share(EPS) ---. 3. At the same time. future cash flows to the firms are more related to expectations of investment in good projects. dividend policy is not always the means used to signal financial markets.93.2002..17. 5. stock prices have traditionally not been affected by the firms’ dividend policies. 2003.14.7%.Finally. Similarly.
and continue decrease to 0. it will have be a expectant future in PROTON. therefore. it is a good information for the investors who hold the share of PROTON. at least. From this figure.66 ringgit in 2002 but decrease 0. it enhances to 1. the ratio reflect an investor receive cash from holding share in the company.Hence. It is influencing by profit available for distribution.after that. Dividend yield ratio: Dividends are most important to some shareholder. Dividend payout ratio: The dividend payout ratio measures the proportion of earning that a company pays out to shareholders in the form of dividends.47 ringgit.it fallen slightly in 2005. It indicates the cash return from a share to its current market value or a measure of cash return on investor's investment.The dividend per share is depending on the dividends announced during a period to the number of shares on issue during that period. Some stockholder invests primarily to receive regular cash income. a higher proportion of earning was paid out as dividends year by year.88% to 3. it represents a increase trend. it is showing in the form. The figure from 2001 to 2005 almost base on the same dividends announced during a period. PROTON EPS has increased by 1.7% in 2002.Earnings Ratio (P/E Ratio): .93 ringgit in 2004.finally. future investments of company and shareholder's expectation regarding dividends.99% in 2001 decrease to 6.93% in 2003. In essence.It depends on net profit and dividends announced for that year. This ratio influences by net profit in annual. perhaps. while others invest in stocks principally with the expectation of rising market prices.54 ringgit in 2005 because of higher profit generated in 2005. Price .14 ringgit in 2003. In this form. the cash return is higher in 2005.28%. it show the dividend yield ratio is increase from 1. but a secondary factor to others. it enhance most in 2004 to 18.then a little increase to 7. An increase of 0. the fundamental investor ratio: EPS measures the overall profit generated for each share in existence over a particular period. Earning per share (EPS): This is. from 10.2% in 2005. it cause of more dividend per share in 2005.
3. under the new management.0% less 28% taxation .626 9.0% less 28% taxation In respect of the financial year ended 31 December 2005 .Interim dividend of 12.Interim dividend of 11.5% less 28% taxation .Final dividend of 10.9 30. UMW Holding Berhad Dividends Amount 2005 RM’000 In respect of the financial year ended 31 December 2003 .0 36.733 6. however. Conversely.0% less 28% taxation In respect of the financial year ended 31 December 2004 .2 7.Final dividend of 9.5 2004 RM’000 Net Dividend Per Share 2005 RM’000 2004 RM’000 .663 7.468 37. so if the risk-free interest rate is at or above this level there is little point in investing in a stock at a 5.3 is only about 18. This means that we are paying RM 5.3 for RM1 of earnings which is quite high and overvalued. PROTON has some future growth potential.P/E ratio of a stock is used to measure how cheap or expensive share prices are. For PROTON.87% return on money. One perspective is that 1/5.Special Interim dividend 45. the current P/E ratio is 5.3 P/E.
8 14. will be accounted for in the shareholders' equity as an appropriation of retained profits in the next financial year ending 31 December 2006.4 Amount Net Dividend Per Share At the forthcoming Annual General Meeting.of 5. amounting to a total net dividend of approximately RM74.251 100.0% less 28% taxation 18. (3144 words) . The financial statements for the current financial year do not reflect this proposed dividend. less 28% taxation. of 20.345 68. Such dividend.000 (14.396 3.6 19.8 sen net per share) will be proposed for shareholders' approval. a final dividend in respect of the current financial year ended 31 December 2005.830.5%. if approved by the shareholders.
and Franco Modigliani (1961). 5. Wikipedia. 650-659. 34. Miller. 4.00.10542. D. 1-18. http://www. http://www. 6. Dividends. Two agency-cost explanations of dividends. 15(1). Last accessed 18 October 2007. New York Life. H. and the valuation of shares. Dividend Policy. Review of Financial Economics. . Available: http://en.wikipedia.References 1. (2007). F.wikipedia.org/wiki/Dividend. Returns & Profits. K. Baker. Malaysia Airline.com/1442/malaysian-airline-returns-profit-2007-exceeds Accessed: 22 Feb 2011.newyorklife.com/cda/0. 3. September. (2010). 7. 2.eturbonews. (1984). M. Easterbrook. H. (2006).org/wiki/Dividend "What Are Dividends?". In search of a residual dividend policy.3254. Growth. 411-433. the Journal of Business. http://en. American Economic Review. Merton H. and Smith.html.
Earnings and Dividend Behaviour. Annuar. of Social Science and Humanities 1 (2): 171–177. M. Journal . M. N. & Shamsher. (1993).8.