FINDINGS
Pharma Company D/E DPS
2005 2013 ACGR 2005 2013 ACGR
Dr Reddy Labs 5.4978 18.7173 16.5485 5 15 14.720269
Lupin Labs 11.005 6.20366 -6.9144 6.5 4 -5.888363
Glaxosmith Kline 0.043976 0.04888 1.32986 24 50 9.6086542
Sun Pharma 19.26678 0.41647 -38.078 3.75 5 3.661465
Cadila Healthcare 11.83121 16.0693 3.90133 6 7.5 2.8285594
Over the period of 2005-2013 , Dr.Reddy Labs has shown the highest growth of the dividend payouts of 14.72% and an corresponding D/E ratio increase of 18.71%. This points to the fact that Dr.Reddy Labs in the last 8 years , has had a aggressive growth strategy , financed by financial institutions in the form of long-term loans and advancements and is also has won the investor confidence by providing them a healthy growth in dividend returns.
All the companies (exception of Sun Pharma) have shown positive correlation between the D/E ratio and the DPS AGCR. Sun Pharma has shown positive growth in the DPS AGCR but decline in the D/E ratio as it has used up it’s cash to re-pay it’s outstanding debts in the year 2012. Sun Pharma has shown strong growth performance during this period and the correlation shows that dividend payouts can not on it’s own standing provide adequate outlook of the company’s performance.
Lupin Labs has shown negative growth in both it’s D/E and DPS during the period. The negative ACGR of DPS shows the shift in policy by the board of directors at Lupin to use the bludgeoning profits to further the growth plans of the company. Lupin , during this period has also undertaken FPO’s that has built their equity funds with a compounded growth rate of 10.57 % during this period. Lupin has ...
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... the study is limited to these 5 companies. No concrete judgment can be reached describing the exact relationship between the ownership pattern and the dividend payout , as many factors come into play while deciding on the dividend decisions. Such qualitative reasoning are hard to judge and include in determining the relationship. We have identified major trends and based our observations on the same.
Future scope of study can include more robust variables that could be used to build a better understanding of the factors that go into providing a dividend payout. A longer duration of study (we studied the company for 8 years) to reduce any short-term anomalies that may have arised in the performance of the companies. We would also like to provide for a comparison study on dividend patterns between pharma industry and the other industries prevalent in the country.
In 2007, Harley Davidson was the world’s most profitable motorcycle company. They had just released great earnings and committed to achieve earnings per share growth of 11-17% for each of the next three years. Their CEO of 37 years, James Ziemer, knew this would be an extremely difficult task seeing Harley’s domestic market share recently top off at just under 50%. The domestic market was where Harley’s achieved the most growth over the past 20 years and with it leveling off, where was Harley going to get the 11-17% was the million dollar question.
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Presenting team analysis The presenting team started out by giving a background about the industry and the companies. The main issue and financial terms were explained. However, we feel that some of the assumptions, such as Merck's flexibility to back out from building the plant in case of failure, were not clearly mentioned. They failed to explain why Davanrik's market risk was lower than its stand-alone risk. Discounted cash flow method, which is the traditional financial tool for evaluating capital allocation, was rejected without explanation.
To collect relevant data, the annual percentage change in net income per common share diluted, net income/net revenues, the major income statement accounts to net revenues, return on stockholders’ equity, the price/earnings (P/E) ratio, and the book values per share for each year numbers were examined. In order for Sun Microsystems to see a greater return in its bottom line assets, it must consider an alternative approach in operating its organization.
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4. Harry Davis’s common stock is currently selling at $50 per share. Its last dividend (D0) was $4.19, and dividends are expected to grow at a constant rate of 5% in the foreseeable future. Harry Davis’s beta is 1.2, the yield on T-bonds is 7%, and the market risk premium is estimated to be 6%. For the bond yield plus risk premium approach, the firm uses a 4% point risk premium.
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