Question

Running Head: DIVIDEND ANALYSIS 1

Dividend analysis

Barbara Tatum

The University of Arizona Global Campus

BUS 401 Principles of Finance

Instructor: Kristine Beaird

November 1, 2021

DIVIDEND ANALYSIS 2

In my case, I will analyze the dividend per share and the annual growth rate for PG over

the last eleven years. Based on the dividend per share and annual growth rate, the company has

made a considerable increase in the rate of dividend per share from $1.80 to $3.12 for the last

eleven years. However, the annual growth rate change has no reduction pattern that can be used

to make a decision on the strength and the weakness of the company. The dividend per share has

increased steadily from 2010 to 2020.

The PG’s annual dividend table

Evaluation time Dividend per share The annual growth rate in

percentage

October 2020 $ 3.12 7.55

October 2019 $ 2.90 3.94

October 2018 $ 2.79 4.10

October 2017 $ 2.68 0.75

October 2016 $ 2.66 2.70

DIVIDEND ANALYSIS 3

October 2015 $ 2.59 5.71

October 2014 $ 2.45 6.99

October 2013 $ 2.29 7.01

October 2012 $ 2.14 8.63

October 2011 $ 1.97 9.44

October 2010 $ 1.80

The company has made an average of 2.559 for the dividend per share over the last ten

years, while the average annual growth rate is over the last ten years is 5.682%. However, the

average growth rate for the last five and three years on the dividend per share is 2.83 dollars and

2.9367 dollars. The analysis indicates that the company was progressive in enhancing divided

per share, particularly over the recent years. The growth rate for the recent five and three years is

3.808 and 5.1967 percent, respectively. Based on the analysis, the PG's annual growth rate has

also increased over the years. The last three years represent the highest annual growth rate

followed by the last five years and finally the last three years. 2011 represented the highest

annual growth rate, and 2017 represented the lowest growth rate of 0.75 percent. There has been

an increase in the growth rate from 2018 to 2020, although there was a slight decrease in 2019.

Based on the current statistics, I choose the highest and the lowest dividend growth rate

as six and four percent, respectively. The choice has considered the highest dividend growth rate

and the average over the last ten years (Kautsar, 2019). In regard to the 2020 analysis, the

DIVIDEND ANALYSIS 4

company experiences the highest rate for the annual growth rate and the dividend per share.

However, the changes in the annual growth rate are not consistent over the years.

Part 2 Preliminary variation

The following formulae can calculate the stock place.

Price = (Kwong, Kim, Lake, Smith, Schladt, Skeans & Kasiske, 2021)𝐷 (1+𝑔)𝑟−𝑔

D represents the most current dividend.

The small (g) represents the dividend growth rate of any fiscal year.

On the other hand, r represents the discount rate.

The lowest PG’s growth rate is 4.0 %.

Since PG is among the largest capitalization companies, the discount rate is settled at 10%,

represented by (r). Therefore, in my calculation, the D will be 3.12 dollars, g will be 4% which is

4/100= 0.04. On the other hand, r will be 10.0%.

Price = $3.12 (1+4/100)0.10−0.04

DIVIDEND ANALYSIS 5

Price = $3.12 (1+0.04)0.06

Price = $3.12+1.04)0.06

Price = $ 3.24480.06

Price = $ 54.08

Based on the second calculation, the company intends to make the price stock based on

the high-end dividend growth rate. Therefore, the value of D and r will remain the same (Li &

Liu, 2019). However, the value of g will change from 0.04 to 0.06.

Price = $3.12 (1+6/100)0.10−0.06

Price = $3.12 (1+0.06)0.04

Price = $3.12+1.06)0.04

DIVIDEND ANALYSIS 6

Price = $ 3.30720.04

Price = $ 82.68

Based on the previous statistics is that in November 2020, the company made

approximately $ 143.30.Therefore the company can reach the price stock that was made in

November 2016 neither through the high-end value nor low-end value. Therefore, through the

formulae, the company's stock price needs to be between 54.08 and 82.68. However, the fact the

company was able to make a stoke price of $ 143.30 indicates that the company's market price is

over-valued. However, the stock price for any fiscal year between 2010 and 2011 was below

54.08 it could mean that the company's market price was under-valued.

Therefore, based on the interest coverage ratio, the company needs to provide $ 82.68 per

share. The calculation ensures that the company is able to pay dividends based on its ability and

market value. Therefore, it is always important to evaluate the stock price to determine whether

the payment of dividends to critical stakeholders is in line with the company's ability to profit.

Understanding dividend per share and annual growth is an important activity in any organization

or a company across the globe. The process enables the organization to understand its financial

strength and the percentage of dividends that should be provided to the shareholders. The two

concepts are also critical to people engaging in the stock exchange (Agrawal, Khan & Shukla,

2019). Therefore, the dividend analysis indicates that the higher the profitability of the company,

the higher the share of the dividend.

DIVIDEND ANALYSIS 7

References

Agrawal, M., Khan, A. U., & Shukla, P. K. (2019). Stock price prediction using technical

indicators: A predictive model using optimal deep learning. Learning, 6(2), 7.

Kautsar, A. (2019). The impact of ownership structure on dividend payout property and

construction companies in Indonesia. International Journal of Academic Research in

Economics and Management Sciences, 8(1), 66-74.

Kwong, A. J., Kim, W. R., Lake, J. R., Smith, J. M., Schladt, D. P., Skeans, M. A., ... & Kasiske,

B. L. (2021). OPTN/SRTR 2019 annual data report: liver. American Journal of

Transplantation, 21, 208-315.

Li, Q., & Liu, T. (2019). Innovation efficiency of china’s high-end manufacturing industry:

Evidence from super-SBM model and malmquist index. Mathematical Problems in

Engineering, 2019.

DIVIDEND ANALYSIS 8