Determine the yearly dividend per share to be paid

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Problem - Dividend Policies

The earnings for Crystal Cargo Inc. have been predicted for the next 5 years and are as follows. There are 1 million shares outstanding. Determine the yearly dividend per share to be paid if the following policies are enacted:

a. A constant dividend payout ratio of 50 percent

b. A stable dollar dividend targeted at 50 percent of the earnings over the 5-year period

c. A small, regular dividend of $0.50 per share plus a year-end extra when the profits in any year exceed $1,500,000. The year-end extra dividend will equal 50 percent of profits exceeding $1,500,000.

YEAR

PROFITS AFTER TAXES

1

$1,400,000

2

2,000,000

3

1,860,000

4

900,000

5

2,800,000

Reference no: EM131775062

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