Describe the output of the graph. Is there are any relation between the CFPS, EPS, and DPS.

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

This assignment is worth thirty percent (30%) of the course work marks and each student is required to complete and submit one assignment. Students will be required to submit their assignments to Moodle drop-box on or before the due date. This research paper is to analyses and assess what factors influence how firms make dividend policy decisions in practice by looking at the data from a firm of your choice. You will be required to research data from a company/firm of your choice and respond to the questions which follow. 

1. Select a company/firm which operates within a sector of your choice. For a 10-year horizon (most recent 10 years would be best), you will be required to gather data on dividend, cash flow, earnings, etc. 

2. Present the data in a table showing the successive years (YR), with the corresponding dividends per share (DPS), earnings per share (EPS), earnings payout, cash flow per share (CFPS), cash flow payout. (If the successive year is not available, the years which are available can be used) 

3. Plot the data on a graph to show the relationship between cash flow per share (CFPS), earnings per share (EPS), and dividends per share (DPS). Year being on the x-axis and dollars on the y-axis. 

4. Describe the output of the graph. Is there are any relation between the CFPS, EPS, and DPS. 

5. Describe how volatile the payout ratios are based on earnings and cash flows. 

6. Is there any correlation between (a) dividends and cash flows AND (b) dividends and earnings. From your analysis, can you say which of the two that dividend is more dependent on? 

7. Research why firms would change their dividend policy citing two firms within recent times which have announced a change in their policy. How was the decision announced, and what did the market think about the change in their policy. 

8. In practice the dividend policy decision is made jointly with capital structure and capital budgeting decisions. Explain why this is the best practice, and the factors that influence the dividend policy decision process. 

9. If you were the CEO of the firm you analyzed, what would be your dividend preference and why. Base you answer on fundamentals and evidence-based information which you have about the firm. 

10. Prepare a logical and clear conclusion based on the foregoing outcome of your analysis and making reference to the literature on dividends and dividend policy.

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