Macquarie Group Dividend Policy: Payout Ratio, Analysis & Policy

This report provides an analysis of Macquarie Group Limited's dividend payout ratio, calculated using EPS and DPS data from the company's annual reports. It identifies the company's current constant dividend policy, where payouts vary with profit volatility, targeting 60-80% of net profit for shareholders. The report discusses alternative dividend policies, such as a stable or residual dividend policy and recommends the company employ a residual dividend policy to ensure that profit is adjusted with respect to the expenditures and working capital for the shareholders to have a clear picture of the development prospects of the firm. Desklib offers a wide range of solved assignments and study resources for students.

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Executive Summary
The purpose of the report is to accomplish the prerequisite of this semester of the year at this
University. The report calculates the payout ratio of Macquarie Group Limited. The EPS and DPS
data is obtained from the companies’ respective annual reports. The report also acknowledges the
dividend policy utilized by the firm. The data about the dividend policy is obtained from the
most resent website of the firm. The report also provides alternative dividend policies available
to the company including their implication to the firm.

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Contents
Introduction................................................................................................................................................3
Discussion...................................................................................................................................................3
Conclusion and Recommendation..............................................................................................................4
References...................................................................................................................................................5

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Introduction
Macquarie Group Limited is not only a financial service firm but also an Australian international
investment bank. The company is headquartered in Sydney, Australia and is listed in Australia
(ASX: MQG). The company provides services and products like finance, asset management,
capital solutions across debts, advisory, commodities, equity and banking.
Macquarie Group Limited was established from Hill Samuel Australia whose originality backs
on 10th December 1969. The company acquired its license as an Australian banking company in
1985. The initial development of the company occurred in Munich and London where the
company opened new offices in 1989. Currently, the company operates in more than 27 nations
with an approximation of 15,061 employees across its residential countries.
The company is ranked as one of top 50 asset managers due to having a value beyond A$495
billion under management. The business operations of the company are guided by five primary
operating principles. Such principles include, Macquare Capital, Corporate and Asset Finance,
Global Market, Macquarie Asset Management, and Banking and Financial services.
Discussion
Dividend Payout Ratio
Year DPS (in A$) EPS (in A$) DPR (in %)
2014 2.6 3.836 0.68
2015 3.3 5.023 0.6569779
2016 4 6.192 0.6459948
2017 4.7 6.576 0.7147202
2018 5.25 7.582 0.6924294
Where;
DPR= Dividend payout ratio
EPS= Earnings per share
DPS= Dividend Per share

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Following the table above, the firm has been distributing dividends which generate a net profit of
more than 60%. The dividend payout ratio represents the amount payed to the shareholders of the
company as dividends. This amount is opposite of retention ratio. The retention ratio is therefore
the amount maintained by the company for the purpose growth or reinvestment.
The company is successful in its operations as the EPS has remained higher than the DPS with
thus periodic growth and reinvestment over the years. The company would have become
unstable had it distributed all its earnings. However, operations are fluent as its satisfying the
dividend payout for the shareholders.
The three dividend payout policy available to the firm include
1. Stable dividend policy
2. Residential dividend policy
3. Constant dividend policy
The company employs the constant dividend policy. In this policy, the dividend payout varies
with the volatility of profit. A pay dividend is provided based on the percentage of the net profit.
The company targets to shareholders an amount equivalent to 60%-80% of the net profit. The
dividend shall be calculated upon the received amount of profit.
Conclusion and Recommendation
In summary, the company employs a constant dividend policy which targets at providing
shareholders with 60%-80% of the net profit. The targeted amount might be disastrous as
investors may earn more while hindering the growth of the company as the little amount is
reinvested. Therefore, I would prefer the company to employ residual dividend policy such that
the profit is adjusted with respect to the expenditures and working capital for the shareholders to
have a clear picture of the development prospects of the firm.

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References
Annual report, Macquarie Group LTD