Use the following financial information to answer the questions that follow: AT&
ID: 2649660 • Letter: U
Question
Use the following financial information to answer the questions that follow:
AT&T
Verizon
Net Income
$7.48 Billion
$5.9 Billion
Return on Assets
2.84%
4.42%
Revenue
$128 Billion
$118 Billion
Total Debt
$77 Billion
$50 Billion
Stock Price
$35.17
$50.11
Dividends per share
$1.80
$2.12
EPS
$1.37
$0.77
Compare AT&T
AT&T
Verizon
Net Income
$7.48 Billion
$5.9 Billion
Return on Assets
2.84%
4.42%
Revenue
$128 Billion
$118 Billion
Total Debt
$77 Billion
$50 Billion
Stock Price
$35.17
$50.11
Dividends per share
$1.80
$2.12
EPS
$1.37
$0.77
Explanation / Answer
Calculation of Pay-out and Dividend Yield Ratio
Particulars
AT&T
Verizon
Net Income
$7.48 Billion
$ 5.9 Billion
Return on Assets
2.84 %
4.42 %
Revenue
$ 128 Billion
$ 118 Billion
Total Debt
$ 77 Billion
$ 50 Billion
Stock Price
$35.17
$50.11
Dividend Per Share (DPS)
$1.8
$2.12
EPS
$3.17
$0.77
Dividend Pay-out Ratio (DPS/EPS)
131.39%
275.32%
Dividend Yield ( Dividend/ Stock Price)
5.12 %
4.23 %
Dividend Pay-out Ratio = Dividend per Share/ EPS
Dividend Yield= Annual Dividend/ Stock Price
Analysis of Pay-out ratios
By observing the pay-out ratios it is appearing that both companies distributing more than 100 % of what they are earning per share. It seems as a good investment but growth potential may be lower in this type of investment.
Calculation of ROE
ROE by using Due Pont Analysis
ROE= (Profit Margin ) x ( Assets Turn Over ) x (Financial Leverage)
ROE= (Net Income / Sales) x ( Sales / Total Assets ) x ( Total Assets/ Total Equity)
Particulars
AT&T
Verizon
Net Income
$7.48 Billion
$ 5.9 Billion
Revenue
$ 128 Billion
$ 118 Billion
Profit Margin ( Net Income / Sales) ( A)
5.84 %
5.00 %
Return on Assets (B)
2.84 %
4.42 %
Total Debt
$ 77 Billion
$ 50 Billion
Total Assets ( Sales / Return on Assets)
$4507 Billion
$ 2669.68 Billion
Equity ( Total Assets
Particulars
AT&T
Verizon
Net Income
$7.48 Billion
$ 5.9 Billion
Return on Assets
2.84 %
4.42 %
Revenue
$ 128 Billion
$ 118 Billion
Total Debt
$ 77 Billion
$ 50 Billion
Stock Price
$35.17
$50.11
Dividend Per Share (DPS)
$1.8
$2.12
EPS
$3.17
$0.77
Dividend Pay-out Ratio (DPS/EPS)
131.39%
275.32%
Dividend Yield ( Dividend/ Stock Price)
5.12 %
4.23 %
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