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The MedTech Company recently reported net profits after taxes of $15.8 million. It has 2.9 million...
The MedTech Company recently reported net profits after taxes of $15.8 million. It has 2.9 million shares of common stock outstanding and pays preferred dividends of $0.6 million per year.
a. Compute the firm's earnings per share (EPS).
b. Assuming that the stock currently trades at $53.68 per share, determine what the firm's dividend yield would be if it paid $ 2.94 per share to common stockholders.
c. What would the firm's dividend payout ratio be if it paid $2.94 per share in dividends?
Solutions
Expert Solution
| a. | EPS | $ 5.24 | ||||||
| Working: | ||||||||
| Net profit after tax | a | $ 15.80 | million | |||||
| Preferred dividend | b | $ 0.60 | million | |||||
| Earning for common shareholders | c=a-b | $ 15.20 | million | |||||
| Shares of common stock outstanding | d | 2.9 | million | |||||
| EPS | e=c/d | $ 5.24 | ||||||
| b. | Dividend Yield | = | Annual dividend | / | Current Selling Price | |||
| = | $ 2.94 | / | $ 53.68 | |||||
| = | 5.48% | |||||||
| c. | Dividend Payout Ratio | = | Dividend Paid | / | EPS | |||
| = | $ 2.94 | / | $ 5.24 | |||||
| = | 56.09% | |||||||
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