Answer to Question #135241 in Financial Math for hazel

Question

(m = million/s ; b = billion/s)
Conifers Ltd, a tree relocation company, follows a stable plus special dividend policy. The company recently (2020) had earnings available to common shareholders of R500m on sales of R2b and has 250m shares outstanding. The company maintains a stable pay-out ratio of 5% and issues special dividends whenever its net profit margin exceeds 10%. Special dividends amount to all profits exceeding 50% of the amount after the stable dividend had been deducted.
Required:
Determine the total dividend that Conifers Ltd will pay per share in 2020.

Answer 1

$DPS=\frac{D-SD}{S}$

$D=500\times0.05=25$

$SP=(500-25)\times0.5\times0.05=11.875$

$DPS=\frac{D-SD}{S}=\frac{25-11.875}{250}=0.0525$