Dividend History and Expected Return on Equity for CBA, BHP, and Woolworths

FINANCE
STUDENT ID:
[Pick the date]

a) The requisite companies for the given task are indicated as follows.
 Commonwealth Bank (CBA) – (Financial Services Sector)
 BHP Billiton (BHP) – (Mining Sector)
 Woolworths Limited (WOW) – (Retail Sector)
For the last ten years i.e. 1st July 2008 to 30th June 2018, the relevant dividend history is
indicated below.
b) It is known that the interim dividends tend to be announced during the year and therefore
the annualised dividends would not only contain final dividend and interim dividend but
also interest earned on the interim dividend. In this case, it is assumed that the interim
dividends have all been given in the middle of year and hence interim dividends would
earn interest over 6 month period approaching the closing of the financial year. These
dividends would be invested at the risk free rate of interest which is 2.64% pa. The

relevant formula for computation of the annualised dividends is highlighted below
(Damodaran, 2015).
The annualised dividends have been computed using the above approach and summarised in
the tabular manner shown below.
c) The aim is to compute the expected next year dividend by deriving the proxy dividend
growth rate on the basis of the annualised dividend outcome that has been obtained in the
above part. The dividend growth rate for the given companies is represented in the tabular
manner shown below.
CWB – It is apparent that the annual rate of change of dividends for the company has been in
a narrow range and has not shown any significant movements on the upside or on the