E13-4 The board of Kopi Industries is considering a new dividend policy that would set dividends at 60% of earnings. The recent past has witnessed earnings per share (EPS) and dividends paid per share as shown in the following table. Year EPS Dividend share 2016 $1.75 $0.95 2017 1.95 1.20 2018 2.05 1.25 2019 2.25 1.30 Based on Kopi's historical dividend payout ratio, discuss whether a constant payout ratio of 60% would benefit shareholders.
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2016: $0.95 / $1.75 = 0.54 or 54% 2017: $1.20 / $1.95 = 0.62 or 62% 2018: $1.25 / $2.05 = 0.61 or 61% 2019: $1.30 / $2.25 = 0.58 or 58% Show more…
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