Question

 

Table 1 is the dividends per share of the 5 companies in the past 5 years. Table2 shows monthly closing share prices (adjusted to include dividends) of 5 companies, and the adjusted closing prices for the ASX200 index.

Calculate the average annual growth in dividends over the last five years. Use this information, along with Gordon’s Growth Model to estimate the implied expected return for each REIT at the current market price. Show your analysis process.

	FY16	FY17	FY18	FY19	FY20
GMG	0.240	0.259	0.280	0.300	0.300
CHC	0.269	0.300	0.318	0.337	0.357
DXS	0.435	0.455	0.478	0.502	0.503
MGR	0.099	0.104	0.110	0.116	0.091
SGP	0.245	0.255	0.265	0.276	0.241

Date	AXJO	GMG	CHC	DXS	MGR	SGP
1/10/19	6663.400	14.093	10.923	11.419	3.108	4.611
1/11/19	6846.000	14.514	10.449	11.667	3.263	4.762
1/12/19	6684.100	13.094	10.710	11.161	3.079	4.357
1/1/20	7017.200	14.744	12.623	12.414	3.355	4.773
1/2/20	6441.200	14.833	12.250	11.867	3.000	4.569
1/3/20	5076.800	11.981	6.733	8.871	2.062	2.454
1/4/20	5522.400	13.021	7.509	8.939	2.210	2.794
1/5/20	5755.700	15.219	9.511	8.783	2.319	3.463
1/6/20	5897.900	14.704	9.511	8.978	2.141	3.211
1/7/20	5927.800	16.930	10.520	8.510	2.090	3.190
1/8/20	6060.500	18.310	12.510	8.830	2.110	3.960
1/9/20	5815.900	17.940	12.430	8.890	2.180	3.780

Answer 1

Stock	2016	2017	2018	2019	2020
GMG	0.24	0.259	0.28	0.3	0.3
CHC	0.269	0.3	0.318	0.337	0.357
DXS	0.435	0.455	0.478	0.502	0.503
MGR	0.099	0.104	0.11	0.116	0.091
SGP	0.245	0.255	0.265	0.276	0.241
Change in dividend	2016	2017	2018	2019	2020
GMG		0.019	0.021	0.02	0
CHC		0.031	0.018	0.019	0.02
DXS		0.02	0.023	0.024	0.001
MGR		0.005	0.006	0.006	-0.025
SGP		0.01	0.01	0.011	-0.035
Change in dividend %	2016	2017	2018	2019	2020	Average growth rate
GMG		8%	8%	7%	0%	6%
CHC		12%	6%	6%	6%	7%
DXS		5%	5%	5%	0%	4%
MGR		5%	6%	5%	-22%	-1%
SGP		4%	4%	4%	-13%	0%

Ke = next expected dividend/Current price + growth rate

	Current price	Average growth rate	Last dividend	Next expected dividend	Ke
GMG	17.94	6%	0.3	0.32	8%
CHC	12.43	7%	0.357	0.38	10%
DXS	8.89	4%	0.503	0.52	10%
MGR	2.18	-1%	0.091	0.09	3%
SGP	3.78	0%	0.241	0.24	6%