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Running head: SLP Capital Structure and Dividends
SLP Capital Structure and Dividends
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SLP Capital Structure and Dividends
Introduction
When a company wants to communicate with the shareholders of a company, they will
probably use the dividends. The dividend is an indication of the value of the amount that will be
distributed to the shareholders (Ohlson 1995). It will usually portray prospects of a particular
company and the people involved will be able to know what is expected of them to raise the
revenues.
In general Electronics Company, the dividends over the three years increased from $0.79
in the year 2013, $0.89 in 2014 and finally $0.92 in the year 2015. This step is a positive
implication of the general performance of the company. The amounts of dividends to be
distributed to the shareholders will be-be high.
The dividends per share of the company increased uniformly over the three years. This
growth is stimulated by the growth in the net profits of the firm. When the firm increases the
profit base of its activities, there will be a lot of revenues being generated by the firm. The
dividends to be distributed among the shareholders will drastically increase. The firm can either
decide to increase the number of investments that they undertake, or they might as well choose to
increase the proportion of dividends that they distribute.
The company might also opt to invest in part of their profits to generate more revenues.
The rate of production witnessed by such firms and other factors will profoundly influence the
decision to create investments by the company. A rapidly growing firm will always want to make
more profits that will benefit the firm both in the long short and long run. The more revenues that
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SLP Capital Structure and Dividends
a company generates, the higher the capability of the firm to increase its number of investment
projects.
The dividend payout ratio is an important valuation method that investors apply to
evaluate the company's general investment potentials and the revenues that the company can
generate. The dividend payout ratio is the widely used metric by the investors. The dividend
payout ratio of general electronics is not stable as it decreases over the three years. This unstable
dividend payout is an indication of financial instability in the company. The earnings are not
adequate to support the dividend yield obtained by the firm over the given years.
When measuring the cash flow of the company, it is significant to use the dividend yield
from the investment of the particular project. The amount you put as an investment will always
be equated to the returns that the investment has attained. The company is experiencing an
increasing dividend yield that can be adequately distributed to the various shareholders. When a
corporation is experiencing difficult economic times in its economic activities, it will usually
reduce the dividend paid to the shareholders. On the other hand, if the company is experiencing
favorable economic times, the dividends paid will be increased.
The best dividend strategy that the firm will apply is the dividend capture method. This
process is an appropriate strategy that will make the company stand out to have a unique
dividends distributions over the given years. With the increased capital investment being
witnessed by the general electronic company is high making the investments potential of the firm
to rise. The payment that the shareholders will get is also high.
The company's dividends per share for the next year will reduce because of the decline in
the number of outstanding shares provided in the enterprise (Gordon 1999). Since the shares
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SLP Capital Structure and Dividends
always determine the rate at which the general dividends will be distributed, a rise or a decline in
the shares will have an impact in the public dividends of the firm.
When the joint stock of the company is eliminated, the company will experience a par value and
the company will experience very minimum liability. This step will highly save on the side of
stakeholders as they will be given maximum payout.
Conclusion
The company dividends are the determining factor that will highlight the level of
performance of the firm. It will depict a current picture of the affairs happening in the given
company, and the shareholders will be able to use this information to evaluate the possibility of
an increase in the profits of the company in future.
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SLP Capital Structure and Dividends
References
Ohlson, J. A. (1995). Earnings, book values, and dividends in equity valuation. Contemporary
accounting research, 11(2), 661-687.
Gordon, M. J. (1999). Dividends, earnings, and stock prices. The review of economics and
statistics, 99-105.