Dividends Bowles Sporting Inc. is prepared to report the following 2014 income s
ID: 2474933 • Letter: D
Question
Dividends
Bowles Sporting Inc. is prepared to report the following 2014 income statement (shown in thousands of dollars).
Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 450,000 shares of stock outstanding, and its stock trades at $36 per share.
A. The company had a 30% dividend payout ratio in 2013. If Bowles wants to maintain this payout ratio in 2014, what will be its per-share dividend in 2014? Round your answer to the nearest cent.
$ --------
B. If the company maintains this 30% payout ratio, what will be the current dividend yield on the company's stock? Round your answer to two decimal places.
--------%
C. The company reported net income of $2.35 million in 2013. Assume that the number of shares outstanding has remained constant. What was the company's per-share dividend in 2013? Round your answer to the nearest cent.
$ ------
D. As an alternative to maintaining the same dividend payout ratio, Bowles is considering maintaining the same per-share dividend in 2014 that it paid in 2013. If it chooses this policy, what will be the company's dividend payout ratio in 2014? Round your answer to two decimal places.
--------%
Explanation / Answer
Bowles Sporting Inc Details Amt $ A Outstanding Common Stock 450,000.00 Expected dividend payout ratio= 30% Net Income in 2014 2,592,000 Expected dividend payment Amt $= 777,600 Expected dividend per share=777600/450000= $ 1.73 B Market price of stock 36.00 Expected dividend per share= 1.73 Dividend Yield= 1.73/36= 4.81% C Net Income in 2013 2,350,000 Dividend paymnet @30%= 705,000 Outstanding Common Stock in 2013 450,000.00 Dividend Per share in 2013=705000/450000= $ 1.57 D Expected per share dividend in 2014 1.57 Outstanding Common Stock 450,000.00 Total dividend payout=450000*1.57= 706,500.00 Net Income in 2014= 2,592,000.00 Dividend payout ratio=706500/2592000= 27.26%