Concept explainers
Dividend payments* In 2017, Entergy paid a regular quarterly dividend of $.89 per share.
- a. Match each of the following dates.
( |
(BI) Record date |
(A2) Tuesday, November 7 | (B2) Payment date |
(A3) Wednesday, November 8 | (B3) Ex-dividend date |
(A4) Thursday, November 9 | (B4) Last with-dividend date |
(A5) Friday, December 1 | (B5) Declaration date |
- b. On one of these dates, the stock price fell by about $.89. Which date? Why?
- c. Entergy’s stock price in November 2017 was about $86. What was the dividend yield?
- d. Entergy’s
forecasted earnings per share for 2017 were about $6.90. What was the payout ratio? - e. Suppose that Entergy paid a 10% stock dividend. What would happen to the stock price?
a)
To determine: The appropriate events in respective dates.
Explanation of Solution
Following are the appropriates matched with respective events:
Date | Event |
Friday, October 27 | Declaration date |
Tuesday, November 7 | Last with-dividend date |
Wednesday, November 8 | Ex-dividend date |
Thursday, November 9 | Record date |
Friday, December 1 | Payment date |
b)
To determine: The date at which the stock price is fell by $0.89 and the reason.
Explanation of Solution
The date is on November 8th and it was the ex-dividend date, the fall in price due to the buyers of the stock on the ex-dividend date are not included in the company’s books prior to the record date and therefore they are not entitled to get the dividend and the price is fall by approximately the dividend amount.
c)
To determine: The dividend yield of the company E.
Dividend yield is the ratio between a firm’s yearly dividend to its share price and it is denoted as percentage.
Explanation of Solution
Therefore, the dividend yield of company E is 4.14%.
d)
To determine: The payout ratio of the company E.
Payout ratio is the ratio which shows the amount of dividend that a firm gives out to its shareholders from its current earnings.
Explanation of Solution
Therefore, the payout ratio of the company E is 51.16%.
e)
To determine: The impact on stock price if the company E paid a 10% stock dividend.
Explanation of Solution
If the stock dividend is increased the number of shares outstanding without changing the market value of the firm, hence, the value per share will decline.
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Chapter 16 Solutions
PRIN.OF CORPORATE FINANCE
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