e-education

• Research three publicly held companies on the Internet to determine their dividend policy. Choose companies from different markets (e.g., manufacturing, information technology, and the service sector). Compare and contrast their policies on how much and how frequently they pay. Have they changed their policies in the recent past? Can you tell from their financial statements how their dividends have varied over the past few years?
• On the Internet, research how tax changes in 2002-2003 affected the propensity of firms to change their dividend policy. What were the tax changes? Can you find any examples of firms that changed their policies? What do you think the impact of these changes will be upon the marketplace and for that firm, specifically?
• Which types of companies would you expect to distribute a relatively high or low proportion of current earnings? Which would you expect to have a relatively high or low price-earnings ratio? Based upon the companies that you researched above, describe the P/E ratios of those companies and how you would categorize them relative to their dividend policy.
• Which of the three theories presented above do you feel is the most accurate relative to your experience with dividend-paying stocks? Why do you feel this way?
• As we saw in the reading this week, when managers decide on a dividend, one of their concerns should be to give shareholders a "fair" level of dividends. If you were the owner of a company and were going to pay a dividend, how would you decide what "fair" means to your shareholders? Explain how you would consider setting a policy on dividends for your company.
• Advocates of the "dividends are good" policy sometimes point to the fact that stocks with high yields tend to have above-average price-earnings (PE) ratios. Refute or support this statement by examining a sample of stocks, their dividend policies, and how they compare to their P/E ratios. Do you see any correlation between P/E and dividend payout? Is this evidence convincing enough to support the argument that the advocates make?