1. Mark Fielding-Pritchard
Limni Co
Mark Fielding-Pritchard
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2. Profit Calculation Revenue 600 Profit 138 Depreciation (55)
Operating Profit 83
Dividend 19
Tax
(26) 76
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3. Part A Dividend Policy Financing Risk M&M say it is irrelevant
Practice shows investors prefer dividends
Payment of one off may signal future dividends
Internally generated funds usually considered to be the best
Insignificant levels of debt, assets are available for security
Equity issues used to raise funds in the past
Specialist Treasury Department
Use of derivative instruments
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4. Dividend Policy All 3 companies have very high pay out ratios.
Theta pays a fixed 40 %
Stability depends on profits rising smoothly
Company needs to be in a cash generative industry
Omega 60%+ Dividends rising faster than profits, almost certainly unsustainable
Share price could collapse if the dividend is cut
Possibly indicative of few good projects
Kappa about 25%
Seems to be the most stable
Shows good increase in profitability
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5. Dividend Capacity Slide 2 Profit after tax 83 Depreciation 55
Reinvestment
(67) 71
Gross Dividend 19 x
Current capacity 90
Tax 26%
(x x 26%)
Required Capacity 99
Therefore 28/74%= 38
Net dividend received after wht =30
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6. Share buy back
Signals excess cash Shareholders can reinvest Possible shortage of projects
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