Hi, My question is for case on dividend policy. It is related to study of BCE\'s

Question

Hi, My question is for case on dividend policy. It is related to study of BCE's dividend policy based on the below questionnaire. I posted it earlier also, but break-up of question was asked, so i am putting again with break-up.

This is 1st part of question with mutiple question. I am putting 2nd quesiton separately.

Dividend data for past years can be found from link http://www.bce.ca/investors/dividendinfo/dividendhistory.Please advise to find solution

Hoping to get better solution with answer to each mutiple question in front of it.

This problem requires you to analyze the current dividend policy and the possibility of a change in its dividend policy for a real company by studying the following questions:

To examine how much cash the firm has returned to its shareholders and in what form (dividends or share repurchase) and to evaluate whether the tradeoff favors returning more or less.

Key questions:

a) Has the firm ever paid out dividends? If so, is there a pattern to the dividends over time?

b)      Given this firm’s characteristics today, do you think that this firm should be paying more dividends, less dividends, or no dividends at all?

Framework for Analysis:

(I) Historical Dividend Policy

c)      How much has this firm paid in dividends over the past few years?

You may find the firm’s past 5-10 years’ dividend payment data (quarterly dividend per share) on the Morningstar or the firm’s Website. Has the amount of the dividend been constant or has it changed? How has it changed? Calculate or find the firm’s past 5 years’ annual dividend payout ratios and dividend yields. Does the firm appear to follow a constant payout ratio policy? If not, what type of dividend policy does the firm follow? Has the firm paid any special dividend in the past 5 years? Does the firm’s dividend policy provide evidence to support the life cycle hypothesis?

d)      How have these dividends related to earnings in these years?

You may plot the firm’s 5-10 years’ dividend per share and earnings per share data in a 2-dimension diagram with the horizontal axis measuring the time. Describe the patterns of the two time series individually (is there any trending high, low, or flat) and correlated (positive, negative, or neither).

(II) Firm Characteristics

e)      How easily can the firm convey information to financial markets? In other words, how necessary is it for it to use dividend policy as a signal?

f)        Who are the marginal shareholders in this firm? Do they like dividends, or would they prefer share repurchase?

g)      How well can this firm forecast its future financing needs? How valuable is preserving flexibility to this firm?

h)      Are there any significant bond covenants that you know of that restrict the firm’s dividend policy?

Explanation / Answer

a) Yes the company has paid dividend regularly, the pattern of dividend payment(increasing trend) from 2010 to 2015 is depicted in the below line chart:

b) Company financial position is improving quarter on quarter as shown in the below table, so it is likely that it would continue to pay more dividends to its shareholders.

c) as shown in the above line chart the company has a regular dividend payout policy.

($ millions, except per share amounts) Q2 2015 Q2 2014 $ change % change BCE Financial Highlights Operating revenues $5,326 $5,220 $106 2.0% Adjusted EBITDA $2,197 $2,144 $53 2.5% Adjusted EBITDA margin 41.3% 41.1% NA 0.2 pts Net earnings attributable to common shareholders $759 $606 $153 25.2% Adjusted EPS(1) $0.87 $0.82 $0.05 6.1% Free Cash Flow(2) $931 $815 $116 14.2%

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