Info

Disney

Aracruz ADR

Insider Holdings

2.60%

20.00%

Capital Expenditures/Total Assets

2.10%

2%

Debt/ Capital

21.02%

31%

Expected growth in Earnings

8.00%

23%

Substituting into the regression equation for the dividend payout ratio, we predicted the following payout ratios for the two firms:

For Disney = 0.3889 - 0.738 (0.021)- 0.214 (0.026) + 0.193 (0.2102) - 0.747 (0.08) = 34.87%

For Aracruz ADR = 0.3889 - 0.738 (0.02)- 0.214 (0.20) + 0.193 (0.31) - 0.747 (0.23) = 21.71%

Substituting into the regression equation for the dividend yield, we predict the following dividend yields for the two firms: For Disney = 0.0205 - 0.058 (0.021)- 0.012 (0.026) + 0.0200 (0.2102)- 0.047 (0.08)= 1.94%

For Aracruz ADR = 0.0205 - 0.058 (0.02)- 0.012 (0.20)+ 0.0200 (0.31)- 0.047 (0.23) = 1.22%

Based on this analysis, Disney with its dividend yield of 0.91% and a payout ratio of 32.31% is paying too little in dividends. Aracruz with a payout ratio of 37.41% and a dividend yield of 3% provides a mixed finding is paying too much in dividends, though the conclusion has to be tempered by the fact that the company is being compared to companies in the United States.

Lessons From The Intelligent Investor

Lessons From The Intelligent Investor

If you're like a lot of people watching the recession unfold, you have likely started to look at your finances under a microscope. Perhaps you have started saving the annual savings rate by people has started to recover a bit.

Get My Free Ebook


Post a comment