Ex dividend ex div means the purchaser of shares is not entitled to receive the

Ex dividend ex div means the purchaser of shares is

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Ex dividend / ex div means the purchaser of shares is not entitled to receive the next dividend payment. The relationship between cum div price and the ex div price is: Market price per share (ex div) = market price per share (cum div) forthcoming dividend per share
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___________________________________________________________________________________________________________________ Page 13 of 21 IPK COLLEGE 1664, JALAN KULIM, 14202 BUKIT MERTAJAM, PENANG TEL : 012-5203212 / 0125113212 / 04-5512588 Subject: Financial Management (DFM1) Prepared by Susan Lim Email : [email protected] Dividend yield The gross dividend : dividend paid + appropriate tax credit Gross dividend yield is used in preference to a net dividend yield, so that investors can make a direct comparison with (gross) interest yield from loan stock. Example: Dividend yield Company A pays dividend of 20c (net) per share. The market price is 300c. What is the dividend yield? Assuming the tax credit is 20%. Solution: Earning per share (EPS) Dividend yield = Gross dividend per share X 100% Market price per share Earnings per share = _____________PBIT______________________ Weighted average number of ordinary shares
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___________________________________________________________________________________________________________________ Page 14 of 21 IPK COLLEGE 1664, JALAN KULIM, 14202 BUKIT MERTAJAM, PENANG TEL : 012-5203212 / 0125113212 / 04-5512588 Subject: Financial Management (DFM1) Prepared by Susan Lim Email : [email protected] Price Earning Ratio (P/E) Is the most important yardstick for assessing the relative worth of a share. Example: The value of P/E ratio reflects the market’s appraisal of the share’s futur e prospects. It is an important ratio because it relates two key considerations for investors, the market price of a share and its earnings capacity. Example: Price earnings ratio Recently a company declared dividend of 12c per share. The share price is $3.72 cum div and earnings for the most recent year were 30c per share. Calculate the P/E ratio. Solution: P/E ratio = MV ex div = EPS = Changes in EPS: the P/E and the share price An approach to assessing what share prices ought to be, which is often used in practice, is P/E ratio approach. The relationship between EPS and share price is measured by the P/E ratio. The P/E ratio does not vary much over time. If the EPS goes up or down , the share price should be expected to move up or down , the new share price will be the new EPS X constant P/E ratio . The higher the P/E ratio, the longer the payback period. The LOWER P/E ratio, the BETTER investment. Example: If a company had an EPS of 30c and a share price of $3.60 in year 2007, its P/E ratio would be 12. If the current year EPS is 33c, expected P/E ratio would remain the same, the share price ought to gone up to 12*33c = $3.96. Price earnings ratio = Market price of share/ Total market value of equity P/E EPS
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___________________________________________________________________________________________________________________ Page 15 of 21 IPK COLLEGE 1664, JALAN KULIM, 14202 BUKIT MERTAJAM, PENANG TEL : 012-5203212 / 0125113212 / 04-5512588 Subject: Financial Management (DFM1) Prepared by Susan Lim Email : [email protected] Exercise: Shareholder ratios The directors of X are comparing some of the company’s year -end statistics with those of Y, the company’s main competitor. X has had a fairly normal year in terms of profits but Y’s
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  • Spring '17
  • JANE KDAL

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