Info

8.00%

8.00%

8.00%

8.00%

8.00%

Dividend Payout Ratio

33.86%

60.00%

60.00%

60.00%

60.00%

60.00%

In fact, increasing dividend payout alone is unlikely to increase the debt ratio substantially.

2. Repurchase stock each year: This affects the debt ratio in much the same way as does increasing dividends, because it increases debt requirements and reduces equity. For instance, if Disney bought back 5% of the stock outstanding each year, the debt ratio at the end of year 5 would be significantly higher as shown in Table 9.7.

Table 9.7: Estimated Debt Ratio with Equity Buyback of 5% a Year
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