Dividend Policy Calculations and Share Repurchase Strategies
Share Repurchase Impact: How many outstanding shares will there be if DividendsActivity SA dedicates the same amount as dividends, with a 5% dividend yield, to repurchase shares in the Stock Exchange Market?
Formula: ((Common Stock / CS Price per Share)) – ((Payout % * Net Income) / Today’s Price per Share))
Payout for 3% Dividend Yield: Calculate the payout required to provide a dividend yield of 3%.
Formula: ((Div.Yield % * Today’s Price per Share * (Common Stock / CS Price per Share)) / Net Income)
Dividend Per Share (60% Payout): Calculate the Dividend Per Share if the payout policy is 60%.
Formula: (Payout % * Net Income) / (Common Stock / Common Stock Price Share)
Dividend Yield Calculation: Calculate the dividend yield based on the previous question.
Formula: DPS / Today’s Price per Share
Dividend Growth (9% Increase, 85% Cap): DividendsActivity SA aims to increase the dividend by 9% every year, with a cap of 85% payout. Calculate the dividend per share for this year.
Formula: Last Year DPS * (1 + % Increase)
Payout for €150 DPS: Calculate the payout required to provide a Dividend Per Share of €150.
Formula: (X * Net Income) / ((Common Stock / CS Price per Share) = DPS
Residual Dividend Policy: DividendsActivity SA considers a capital budgeting of €1,100,000 to buy a new office next year and wants to maintain its current capital structure. Calculate the Dividend Per Share based on the residual dividend policy.
Formula: ((Net Income – Capital Budgeting * ((Today’s Price per Share * Common Stock / CS Price per share) / (Today’s Price per Share * Common Stock / CS Price per share + Long Term Debt))) / (Common Stock / CS Price per Share)
Dividend Growth (1% Increase, 90% Cap): DividendsActivity SA aims to increase the dividend by 1% every year, with a cap of 90% payout. Calculate the payout for this year.
Formula: (Payout % * Net Income / (Common Stock / CS Price per Share)) * ((Common Stock / CS Price per Share) / Net Income) * 100
Dividend Yield Growth (1.5% Increase, 30% Cap): DividendsActivity SA aims to increase the dividend yield by 1.5% every year, with a cap of 30% payout. Calculate the payout for this year.
Formula: (((DPS Last Year / Last Year Price per Share) * (1 + Div.Yield Increase %) * Today’s Price per Share * (Common Stock / CS Price per Share)) / Net Income
Dividend Yield (90% Payout): Calculate the dividend yield based on a 90% payout.
Formula: DPS = (Payout % * Net Income) / (Common Stock / Common Stock Price Share) >>> DPS / Today’s Price per Share
Share Repurchase Table (Price and Shares)
Table 1:
- Vertical Axis: List each shareholder (ABC) with Total Accumulated Shares and Total Amount.
- Horizontal Axis: List all prices per share.
- Total Amount: Enter Total Amount (Maximum: % * Net profit or as specified).
- Total Accumulated Shares: Sum A+B+C (for the first column only) /// Sum Total Previous + Sum ABC (for the rest).
- Total Amount: Price Menor * Sum A+B+C (for the first column only) /// (Price * Sum A+B+C) + Total Amount Previous (for the rest).
- Highlight the first value in Total Amount that exceeds the calculated Maximum.
Table 2:
Only the shares in the Total Amount column selected above change in this table.
- Everything remains the same until the Total Amount selected above, then change the Total Amount to the Maximum.
- Calculate outside the table: Maximum – Total Amount Previous to the one exceeding the maximum in Table 1.
- Demanded Shares = Sum of shares in the column selected (Table 1).
- Shares to be repurchased = (Maximum – Total Amount Previous to the maximum (Table 2)) / Price of corresponding column.
- Calculate % # = Shares to be repurchased / Demanded Shares.
- Change the shares in the column being worked on (Table 2); ex: Shares A (Table 1) / %#.
- New total accumulated shares (Table 2) = Sum A+B+C (Table 2) + Total Amount Previous (Table 2).
- € / Average Share = Maximum (Table 2) / Total Accumulated Shares (Table 2).
- Add a column to the right with the sum of shares for each shareholder.