Dividend Policy of Confidence Cement Ltd.

Topics: Dividend, Cash flow, Stock Pages: 17 (3822 words) Published: December 8, 2009
Dividend policy of Confidence Cement Limited



Dividend Policy of Confidence Cement Limited

Submitted to:

Dr. Mahmood Osman Imam


Department of Finance

University of Dhaka

University of Dhaka

December 25, 2008


Dr. Mahmood Osman Imam


Department of Finance

University of Dhaka


Executive Summary

1.1Company Profile in Brief5
Basis of Accounting5
1.2 b ackground of the study6
1.3 Objective6
1.5 Methodology7
1.6 Limitations7

Chapter 27
2.1 Dividend policy of a firm7
2.2 Dividend relevance:8
2.3 Dividend irrelevance:8
2.4 Different Types of dividend9
2.5 Different types of dividend policy10
2.6 diuviudend as a signal about firm’s performance:11

Chapter 311
Dividend Policy of Confidence Cement Limited11
3.1 Financial Performance and Dividend Payout12
3.2 Earnings per share and dividend12
Fig.1.Comparison between EPS and DPS13
Fig.2.Comparison between Payout and Growth14
Fig3: OCF, FCF and dividend per share15
Fig4: Changes in stock price16
Fig5: Growth and DPS17
3.3 Implications17
Fg6:P/E ratio of Confidence Cement Limited17
Fig7: Net Asset Value per Share18

Chapter 418
4.1 Stock dividend per share18
4.2 Findings19
4.3 Recommendations19

Executive Summary

Paying out dividends belongs to the easiest way to communicate financial well-being and shareholder value, since they are sending out a powerful message about future prospects and performances. The willingness, and also the ability of companies to pay out steady dividends and may be even to increase them, provides the shareholder with valuable about the company fundamentals.

There is the opinion of some financial analysts that a dividend policy is irrelevant because investors have the ability to create homemade dividends. That can be done by adjusting the personal portfolio to reflect the investor’s own preferences. A second argument suggests that little to no dividend payout is more favorable for the share price to go up.

At Confidence Cement Ltd. the company has a tendency to pay a regular cash dividend based on the earnings. In 2004, in spite of incurring loss; it still paid a dividend of 5%. The company had always paid cash dividends. Stock dividend had never been paid. Paid up capital of the company is only 38% of the authorized capital.

After analyzing the annual reports of 2003, 2004, 2005 and 2006, it has been revealed that the company had adopted a dividend policy showing the tendency of a stable one. It is an indication of the management’s concern towards attracting the investors. Payout ratio of the company shows a steady trend in 2005, 2006, and 2007. Earnings per Share (EPS) in recent years are growing at a faster rate than the previous ones. The company’s overall growth rate is increasing. Both Free Cash Flow (FCF) and Operating Cash Flow (OCF) is showing a slightly downward trend.Net Asset Value (NAV) has remained more or less constant over the last 8 years.



Dividend policy refers to the policy chalked out by companies regarding the amount it would pay to their shareholders as dividend. With profit making comes the question of utilizing the profit gainfully. The company has two options with them: They can retain these profits within the company.

They can pay this profit in form of dividend to the shareholders.

The dividend policy t...
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