Assuming all things are held constant other than the item in question, for each of the companies below:
i. A company with a large proportion of insider ownership, all of whom are highly income individuals.
ii. A growth company with an abundance of good investments opportunities.
iii. A company experiencing ordinary growth that has high liquidity and much unused borrowing capacity.
iv. A dividend paying company that experiences an unexpected drop in earnings from a trend.
v. A company with volatile earnings and high business risk.
Required:
Explain whether or not you would expect each company to have a medium/ high or low dividend payout ratio and the reasons for such categorization. (15 marks)
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