During this period, AWL’s dividends per share (DIPS) climbed steadily from $1. 16 to $2. 08, with only four changes, while the company’s earnings per share (PEPS), an indicator valuating a company’s financial performance in terms of how much earnings made for equity holders, fluctuated greatly, ranging from a low of $1. 72 to a peak of $27. 65. It should be noted with great attention that Howl’s DIPS had remained unchanged at $1. 73 for ten consecutive years before it rose again to $1. 92 in 2010. C] Dividend Policy
As one of the biggest corporations in Hong Kong, HOWL has long been dedicated to providing stably increasing returns to its investors (HOWL, Annual Report 2012).
The actual dividend payouts follow quite consistent with the company’s statement: four moderate rises without any decrease, as demonstrated by the above figure. Figure 1. 2 The dramatic difference between the standard deviation of PEPS (6. 66) and the standard deviation of DIPS (0. 22) also indicate that Howl’s dividend payouts have kept stable regardless the company’s income levels.
This pattern could be called dividend smoothing. ј Associated Factors Discussion HOWL is a large multinational corporation that operates a variety of businesses in 52 countries across the world. Its operations consist of: ports and related services, property and hotels, retail, infrastructure, energy, and telecommunications. Considering the scope and nature of the business, a long- term target level of dividend is of great importance in maintaining the AWL’s recognition and also fulfilling the company’s commitment.
Thus it is reasonable to expect HOWL to alter dividend payout levels conservatively. In fact, except the increase in 1999, all three other increases in dividend payouts accomplished with higher average PEPS (as shown in Figure 1. 2). It is very likely that HOWL generally set dividends at a level it expect to be able to maintain based on the company’s earning prospects. CLC C] Dividend Payout History over Last Fifteen Years Figure 2. 1 Given is a figure illustrating Clip’s dividend payouts from 1998 to 2012.
Except for 2002, the company’s dividends grew continuously from $1. 81 to $2. 57 within the period. This change is steady, given that the standard deviation of DIPS is only 0. 28. Dividend Policy Figure 2. 2 CLC is committed to creating value for its warehouses in the form of dividends and share price appreciation. The company distributes cash dividends four times throughout every single year. The virtually constant increase in payout level, together with the low standard deviation of DIPS (0. 28), implies that CLC is acting comply with its articulated policy. ј Associated Factors Discussion Unlike HOWL which decides to raise the payout level only if it seems that the company would anticipate higher PEPS continually in the future, CLC increases dividends without much consideration on its earnings. As shown in the figure, even though the PEPS in recent two years drops, the DIPS still increases slightly. Considering that CLC is an energy company that provides daily utilities, its profitability is very likely to maintain stable whatever the economic condition is (the standard deviation of PEPS for CLC is only 0. 2, with a low coefficient at only 20. 23%). Thus the company has the ability to smooth dividend payouts. Figure 2. 3 Source : Google Finance, 2013 In addition, since the dividend serves as an important factor determining the share price, CLC may choose to pay more dividends when it tends to raise its hare price. A historical data on stock price of CLC clearly demonstrates that, as DIPS rose from $1. 88 to $2. 48, the stock price climbed from around $32 up to over $50. From 2007 to 201 0, when DIPS was restricted to $2. 8, the share price did not change much, excluding a considerable increase and a following plunge during 2008, which was largely due to the outbreak of global financial crisis. As the DIPS resumed the slight increase since 2011, the share price began to rise to over $60. It can be concluded that such payout policy may be explained by the company’s ointment to its shareholders and the dividend serves as signal on the company’s future prospects. BEA Figure 3. 1 BE-Ass dividends vary from year to year, with a standard deviation of 0. 41 .
Compared with the figures of HOWL and CLC, Beak’s payouts are more uncertain, given that the coefficient of the company’s DIPS is much higher than the others. After reaching to a peak of $1. 66, the DIPS slumped to a bottom of $0. 23 during the economic downturn. Then the ratio rebounded in the following years. Figure 3. 2 For each financial year, BEA declares interim dividend in August and announces IANAL dividend in coming year’s March. The company arranges its dividend scheme according to its earning level and manages to pay what it declares, though each years amount vary greatly.
Given that BEA has a less fluctuated PEPS in terms of the coefficient (49%) between mean and standard deviation than HOWL (107. 72%) but a much volatile DIPS, Beak’s dividend payouts are more exposed to external environment. C] Associated Factors Discussion The company’s payouts largely depend on its earnings made. As a commercial bank, cash is of great significance to Beak’s operations. Thus the liquidity of the company also stands out concerning dividend payouts. The company’s need for cash should much more urgent than HOWL and CLC during the financial crisis.
The company, however, still paid at least some cash dividends when the PEPS was nearly zero. This may be explained by the fact that during that time, the company disposed its entire collateralized debt obligation portfolio (BEA, Annual Report 2008) and lacked investment opportunities. When the shareholders’ value become sluggish in a company, it is reasonable for the company to pay dividends. Key Factors The above discussion points out some important factors that affect a company’s payouts.
Generally, earnings and commitments are the two factors that the company must consider when paying dividends. For firms conducting dividend smoothing, they decide dividends at the level seemed to be achievable in a foreseeable future. For firms that favor high share price, they tend to pay dividends with sustained growth to maintain the investors’ confidence. In addition, the recognition of the company, the nature of the business, and the change of investment opportunities in external environment may also exert influence on the company’s dividend policy.
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