DIVIDEND PAYOUT RATIO
A. What
is Financial Statement ?
A financial statement (or financial report) is a formal record of the financial activities
of a business, person, or other entity. Relevant financial information is
presented in a structured manner and in a form easy to understand. They
typically include basic financial statements, accompanied by a management discussion and
analysis.
B. Scope
of Financial Statements
There is some analysis to
calculate a company's financial performance, that is :
a. Liquidity Analysis
b. Solvency Analysis
c. Profitability Analysis
d. Cash Flow Analysis
e. Bankruptcy Analysis
f. Risk Analysis
g. Investment Analysis
C. Profitability Analysis
Profitability analysis is
an analysis of the operating performance of a company. On this analysis, the
company measures the company's ability to generate income either by using
existing assets as well by using their own capital.
Every
company is most concerned with its profitability. One of the most frequently
used tools of financial ratio analysis is profitability ratios which are used
to determine the company's bottom line and its return to its investors.
In the analysis of profitability
ratios is composed of two types of ratios that show a profit in relation to
sales and earnings ratios show in conjunction with the investment.The ratio of
dividend payout ratio is a ratio that shows the profits related to investment.
There is seven method to
calculate the profitability analysis of a company, that is :
a. Gross Margin Percentage
b. Earning
Per Share
c. Price
Earning Ratio
d. Devidend Payout Ratio
e. Devidend
Yield Ratio
f. Return
on Total Assets (ROA)
g. Return
on Common Shareholders’ Equity (ROCE)
D. Dividend
Payout Ratio
The dividend payout ratio is the amount of dividends
paid to stockholders relative to the amount of total net income of a company.
The amount that is not paid out in dividends to stockholders is held by the
company for growth. The amount that is kept by the company is called retained
earnings.
Dividend pay out ratio refers to
the fraction of Net income (Income after tax) paid out to shareholders as
Dividends. Investors with preference to high incomes normally go for companies
with higher dividend ration while those who prefer capital appreciation go for
companies with low pay out ration.
There is two alternative formula to calculate
the devidend payout ratio :
1. IF WE KNOW THE AMOUNT OF DIVIDEND PER SHARE AND
EARNING PER SHARE . WE CAN USED THE FORMULA ONE.
2. IF WE DON’T KNOW THE AMOUNT OF DIVIDEND PER SHARE
AND EARNING PER SHARE . WE CAN USED THE FORMULA TWO.
Dividens and dividens per share shown in the
statements of change in equity
·
Net income and earning per share shown in the
statements of comprehensive income
Explanation :
1.
Dividend per share (DPS)
Dividend per share (DPS) is the total dividends paid out over an entire
year (including interim dividends but not including special dividends) divided
by the number of outstanding ordinary shares issued
2.
Earnings per share (EPS)
Earnings per share (EPS) is the amount of earnings per each outstanding
share of a company's stock.
3.
Dividends
Dividends are payments made by a corporation to
its shareholder members. It is the portion of corporate profits
paid out to stockholders. When a corporation earns a profit or
surplus, that money can be put to two uses: it can either be re-invested in the
business (called retained
earnings), or it can be distributed to shareholders.
4.
Net
income
Net income is the net
profit of the company haved. The profit is after
corporate income tax
E. How
to calculate dividend payout ratio
1. Determine
the net income of the company i.e Income after all expenses and corporate tax.
2. Determine
the dividend payment level. This is normally predetermined by the company's board of
directors and approved by members at the annual general meeting e.g usd 0.4 for
every share.
3. Divide
the Dividends amount by the net Income i.e Dividends/Net income.
4. Remember
strictly speaking dividend payout ratio measures the dividend payout to common
shareholders as such the dividend attributable to preferential shares will be
subtracted from the total dividends.
5. Thus the
new formula will be:
Dividend payout ratio=(Dividends-Preferred stock dividends)/Net earnings.
6. The ratio can also be calculated on a per unit basis
thus: Pay out Ratio=DPS(Dividend per share)/EPS(Earnings per share)
F. How
to calculate dividend payout ratio of PT SEPATU BATA
1. If we use the the formula one :
·
THE
AMOUNT OF DPS, WE CAN GET FROM STATEMENT OF CHANGE IN EQUITY.
THAT IS Rp 1230 ,00
·
THE
EPS , WE CAN GET FROM STATEMENTS OF COMPREHENSIVE INCOME.
THAT IS Rp 4217
2.
If we use the formula two :
·
THE
DIVIDEN WE CAN GET FROM STATEMENT OF CHANGE IN EQUITY.THAT IS Rp 15.990.000,00
· THE
NET INCOME WE CAN GET FROM STATEMENT OF COMPREHENSIVE INCOME.
THAT IS Rp 54.823.054,00
AND WE CAN SEE THE RESULT OF BOTH FORMULA IS SAME.
Ø THE INTERPRETATION
So, the ratio of income that paid out to the shareholder as
dividend is 0,29 or 29 %. In the other words, the net income of the company
haved , can results 0,29 or 29 % dividen ratio.
G.
CONCLUSION
Dividend pay out ratio refers to the fraction of
Net income (Income after tax) paid out to shareholders as Dividends. Investors
with preference to high incomes normally go for companies with higher dividend
ratio.
This ratio formula is
used by some when considering whether to invest in a profitable company that
pays out dividends versus a profitable company that has high growth potential.
