The dividend payout ratio is typically defined as the percentage of the firm\'s

Question

The dividend payout ratio is typically defined as the percentage of the firm's residual cash flow (what's left over after all claimants have been paid) that flows to the shareholders in the form of a dividend. In many cases the quoted dividend is the annual dividend, although it is typically paid out in quarterly chunks. Suppose that Samsonite Inc. has a payout ratio of 30%. What is its annual dividend if its residual cash flow is $5.00 per share? $ What is its quarterly dividend?

$________

Place your answers in dollars and cents without the dollar sign

Explanation / Answer

Annual dividend per share = Residual cash flow per share * payout ratio

Where,

Residual cash flow = $5.00 per share

And payout ratio = 30%

Therefore,

Annual dividend per share = $5.00 *30%

= $1.5 per share

Quarterly dividend per share = Annual dividend / number of quarters in a year

= $1.5 per share / 4

= $0.375 per share per quarter

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