FINANCEa)The three companies that are selected for this task are as follows.BHP Billiton LimitedCommonwealth Bank of AustraliaWoolworths Limited The dividend payment history for the above three stocks has been obtained from DatAnalysisPremium database for the time period starting on July 1, 2007 and ending on June 30, 2017.The dividend payment history is highlighted in the table indicated below.b)In order to compute the dividends paid for each company on an annual basis, the interimdividend would need to be annualised as 6 month of interest would be received taking intoconsideration an applicable rate of interest as 2.72% p.a. The relevant formula andapproach for annualising an interim dividend is indicated below.Annualised dividend = Interim Dividend *(1+ 0.0272)0.5In the above formula, the time period is six months or 0.5 years.Based on the above formula, the annual dividend for the last ten years for the selectedstocks is summarised in a tabular manner indicated below.
FINANCEc)The growth rate of dividend for the three selected companies has been summarised in thetable highlighted below based on which the average dividend growth rate has beencomputed.Based on the average dividend growth rate during the period, it is apparent that forWoolworths, the average dividend growth rate is way too low which is being adverselyimpacted due to the significant drop in dividend in FY2016. For BHP Billiton, the averagedividend growth rate seems way too high which is attributed to the abnormal jump in FY2017which is an aberration rather than being the normal trend. However, for CBA orCommonwealth Bank, the average dividend growth represents a realistic value which wouldbe used as a proxy growth rate for dividend.For BHP Billiton, there was a severe drop in dividend in FY2016 owing to the loss that thecompany had made. Further, the high growth in dividend in FY2017 is also attributed to thedip in dividends in FY2016. Hence, these two values would be excluded from the averagedividend growth rate computation. Further, years FY2009 and FY2015 are also not being
End of preview
Want to access all the pages? Upload your documents or become a member.
Dividend History and Expected Return on Equity for CBA, BHP, and Woolworthslg...
CASE STUDIES IN FINANCE : FIN3CSF ASSIGNMENTlg...
Computation of Holding Period Returns and CAPM Equation for WBC and CBA Stockslg...